The envelope method · Step 5
Build your safety net
A safety net is money set aside for when something goes wrong. Build it straight after your must-pays.
What would you do if your car broke down tomorrow, or an unexpected medical bill arrived? A safety net is what protects you.
What it is
It's money set aside so that when something bad happens, you have something to use. Without it, a broken car or a medical bill has nothing to pay it.
Pay yourself first
Fill your must-pay envelopes first. Then, before anything else, put money into your safety net.
How big it should be
Start with about one month of your bills and food. You found that number in step three. That's the first stage. Grow it over time for more protection.
Before paying down debt
Build your safety net before you start paying down debt. It stops a surprise from pushing you deeper into debt.
Do it in Smarter Budget
- Make a group called Savings.
- Add an envelope called Safety net.
- Set its Purpose to Emergency fund. Smarter Budget then fills it straight after your must-pays.
- Give it a Target of about one month, from What you need each month.
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General information only, not financial advice. Think about your own situation, and talk to a qualified professional before big financial decisions.