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Putting away money for emergencies

If Congress doesn't find another way of shrinking

If Congress doesn't find another way of shrinking the budget deficit, the country faces a "fiscal cliff" of automatic federal spending cuts and the expiration of tax breaks. Credit: iStock

Everybody knows they should save for emergencies, yet nearly half of Americans do not have enough money to cover three months of expenses, a recent survey shows.

Putting away money in tough times can seem challenging, but experts say taking small steps can mean savings -- enough to cover three to six months of expenses.

Make it painless, experts say. When you get a lump sum -- a tax refund or bonus -- save it.

"That will give a big boost to your savings without having to change any of your daily spending habits," said Daniel O'Connell, managing director for Merrill Lynch Wealth Management in Garden City.

Have 10 percent of each check automatically deducted into a savings account. "Pay yourself first," said Karen Carlson, director of education for InCharge Debt Solutions in Orlando, Fla.

Start living on a cash basis. "Those who pay with cash typically save 20 percent on their monthly spending, which you can put into savings," said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.

Refinance and reduce your mortgage. Put the savings into your emergency fund, said Ralph Ventura, branch manager at M&T Bank in Great Neck.

Look for savings when you spend money. For example, if you set aside $500 for a flat-screen television, but find one for $400, put that $100 into savings, said Joe Wilson, a wealth management adviser for TIAA-CREF in Atlanta.

"People say they can't afford to save," Cunningham said. "I say they can't afford not to."

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