Dear Dave,

I make $25,000 a year, and I’m single. I expect my salary to increase to $35,000 next year, so can I get by with a $500 starter emergency fund instead of $1,000? I have about $38,000 in debt right now, including student loans, and I don’t know how to keep up with bills and everything if I try saving a bigger emergency fund.

Jane

Dear Jane,

You really need a starter emergency fund of $1,000 if you’re at a point in life where student loans are in the picture. It might seem like an impossible task right now, but that should be your first big goal. A written, monthly budget will go a long way toward helping you achieve that goal.

Making a budget for your money isn’t rocket science. It’s a simple, written planning process where you give a name and destination to every dollar you make before the month begins. Food, shelter, clothing, transportation and utilities are necessities, so they come first. After you’ve taken care of those, make sure you’re current on your debts. Once all that is out of the way, put every spare dollar you can into your emergency fund.

If you do this with a sense of urgency, and limit spending to necessities, it won’t take very long. You’ll be surprised by how quickly it can happen, and you’ll love the newfound sense of security you’ll have in knowing $1,000 is sitting there ready to cover life’s little emergencies!

—Dave