I woke up to a notification that my online savings bank, Ally, increased their APY (Annual Percentage Yield) from 1.8% to 2.0%. Ya’ll, that’s good for a savings account. 

One key action to achieving financial independence is an emergency fund. If you are anything like me, you have a back up credit card sitting in a drawer somewhere that’s dedicated solely to emergencies. This is an OK idea, but only on one condition.

What’s the condition? You plan to use the emergency credit card as a placeholder only for one billing cycle. If you don’t plan to pay off the balance, then you can be subject to a double cascade of issues. The first being interest payments on the money and a credit utilization change to your credit report. Double whammy!

What’s the solution? Open up an online savings account and build your emergency fund. The general formula for a fat emergency fund is six months of expenses.

For example, say you are a party of “2” and your combined monthly expenses are $2,500.00.  A reliable emergency fund amount (in case your car blows up or you lose your job) is $15,000.00.

“What?,” you might declare, “$15,000.00 is a shit load of money.” Yes, it is.  Agreed, (but doesn’t having $15,000.00 in savings sounds deliciously comfortable?)  Start. Ally Bank has auto-transfer, so you can set that up and the cash magically moves into your savings account without you having to touch it. 

Ally Bank has a good track record of APY increases and this year has increased their rates 10 times. 

So, THANKS, ALLY for helping my money make money. (isn’t that why we are here?)

Paige

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