Suze Orman Says This Is the 'Most Important Part of Your Financial Foundation'

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  • Becoming financially secure is an important goal, and you'll need to build a firm foundation to do that.
  • Suze Orman says an emergency fund is crucial to building that foundation.

This tip could make all the difference in your finances.

Financial security is a dream for most people, but it is one that is within reach. You don't have to spend your life worrying about how to pay the credit card bill or what you'll do until your next paycheck comes when you have an empty bank account.

But, if you want to be secure, you need to build a solid financial foundation. Finance expert Suze Orman has provided a crucial tip on how to do that.

This Suze Orman advice could help you build the foundation for a secure future

So, how can you set yourself up for financial security, according to Orman?

"I have said it for years now and once again I am going to repeat it - the most important part of your financial foundation is an emergency fund," Orman said.

Orman recommends that you have enough money set aside to cover 12 months of living expenses, although she realizes saving so much will take time. By investing so much in a high-yield savings account where the money is accessible, you can make sure you are prepared for "whatever the economy throws our way in the coming months."

Why is an emergency fund so important?

Orman is absolutely spot on when she describes an emergency fund as a crucial part of your financial foundation. The basic reality is, an emergency fund enables the other parts of your money management to work effectively and allows you to avoid the types of disasters that can set you off track from money financial goals or building financial freedom.

See, if you have money saved for emergencies, it will be much easier to stick to your budget. When a surprise expense that you did not plan for crops up, you won't have to go over your preset spending amounts and drain your bank account or potentially end up in debt.

An emergency fund will also make it possible for you to avoid going into debt when surprise expenses happen -- even if they are big ones. If you're faced with medical bills due to an unexpected illness or if you have to pay for a costly car repair, your emergency fund is there so you don't need to reach for the credit card.

Bigger disasters such as foreclosure and repossession can also be avoided too, if you have 12 months of living expenses in the bank. You'll still be able to pay your bills even in the event that you lose your job and it takes a long time to find another one.

For all of these reasons, it's easy to see why an emergency fund creates the foundation for your financial life to flourish. You not only won't face potential financial crises that can set you off track, but you will also have the peace of mind that enables you to invest in growing your wealth since you'll know that you won't need to raid your investments when surprise expenses happen.

Listening to Orman on this issue is crucial, so if you do not already have a large emergency fund, you should open a high-yield savings account and start working on saving what you can. Every little bit gets you closer to that fully-funded emergency savings account that will be the foundation of your secure future.

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