Well, you probably know about the fact that Payday loans are an expensive way to get a loan, but you also know that they fill a necessary gap and that they provide benefits (especially the No Credit Report option). But in the long run it will work out better for you to be your own lender by building up an emergency fund that you can treat like a loan for yourself. Build a $500 emergency fund. Although money may be tight, but we all need an emergency fund for unexpected bills or repairs or when our income fluctuates. Funding this emergency loan account in one step is too difficult and there are better options for you to fulfill this task. Start by having a small goal, such as $10 per paycheck.

If your check is directly deposited into your bank account, ask your employer to direct deposit a portion to a savings account. Many employers offer this option and it is a great tool to save money. Why? Because it is money you will "never" see in your normal spending account (aka checking account).

Money that we do not see or have available, is difficult to be spent. Therefore this "hidden" deduction makes it easy for you to slowly build up a small safety cushion. It will take a while to reach your goal and it will take discipline, but the payoff will be huge. The next time your car breaks down and requires an expensive repair you can fall back to your emergency fund and save the interest you would pay for a Payday loan.

However, the best way to treat a situation like that is to pretend you are taking out a loan. Set a goal to pay it back - including interest. Your nest egg will grow faster suddenly and provide you with more benefits accordingly. And once you reach $500 or more in savings you might even notice that you are earning interest while the money is in your bank account. Do not use the money for some "special" financial investments. Stick to a money market or savings account as your investment options. Money market accounts offer easy access over the Internet and you can transfer the money back to your checking account usually within 2-3 days. For emergencies this is most likely sufficient enough.

Building a sufficient emergency fund will take time and patience. Stick to your goals and do not use that money for convenient spending. With little effort you are able to make a significant difference to your financial situation down the road.

Chris Puetz frequently writes about financial tools and products. You can find additional articles (i.e about Fast Cash Loans) published on many websites on the Internet.

This entry was posted on Thursday, June 11th, 2009 at 9:38 pm and is filed under Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.