When you generate more money it can be tempting to just blow it. Since you’ve been working harder, maybe you want to have something to show for your efforts. If you’re unsure where you should put the extra money and don’t want to make a misstep, instead of playing eeny, meeny, miny, moe or shooting from the hip with your financial goals, you might want to stop guessing in the moment.

A recent survey by Bankrate.com showed that 58% of those surveyed have less than 3 months saved up for emergencies. If your emergency fund is lackluster or has taken a beating, this is the first place to park your funds. Working on a doom and gloom fund can make you feel a little resentful at first. If you find that this makes it harder to get ahead with other financial goals, here are some guidelines to put into place.

Peter Huminski, President and Wealth Advisor at Thorismwealth.com explains, “My rule of thumb is to get the emergency fund in place first. It is not the sexiest goal, but it is vital to help the client succeed with other goals.” Huminski also points out that defining what an emergency is to a client is essential. This way, there’s no confusion about how this fund is spent. He clarifies that, “Emergencies are things like the HVAC going out or transmission failing on the car.” Also be sure to differentiate between regular home maintenance like replacing a screen door and an emergency, like busted pipes. Home maintenance is a different category but needs to be included. Also, if you neglect to maintain your home, small problems can later snowball into bigger problems that can turn into emergencies.

Huminski adds that once the emergency fund is in place, the focus can switch to other priorities. The additional goals are funded in order of importance. Then you figure out how long it will take to fully fund each one. For example, if you’re confused or feeling conflicted about how to divvy up saving for college and a dream vacation because they are both equally important to you, keep in mind that being able to accomplish short term goals helps people stay focused on the longer term goals over time.

Roger Wohlner, an advisor based in Arlington Heights, IL., who writes at The Chicago Financial Planner agrees that the best thing here, as mentioned, is to have targets for your important “buckets” such as college, retirement, etc. He adds, “If some extra money pops up you could spread it proportionately over these accounts or focus on area(s) where you might have a shortfall.”

The Bottom Line

So if your freelance efforts take off, your business starts to boom or you just make some money on the side, consider stashing money away in an emergency fund. Then you can start funding other priorities and “sunny days” like a vacation once the rainy day fund is covered.

Karen is a Nationally Syndicated Personal Finance Writer who sharpens her skills at US News Money. You can also find her placing clients on podcasts and reading about home office organization, productivity and habits.

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