An emergency fund. Do you have one?
No, it’s not for extra beer or that really awesome purse that just came out. It’s for tried and true emergencies.
Many experts agree that it’s wise to have 3-6 months of expenses covered in case you lose your job or another disaster hits that makes it impossible for you to work.
When you’re starting from scratch, reaching those amounts (6 months’ worth of my salary?!!) seems just about impossible. But if you apply yourself and practice some self-control, slowly but surely you’ll see that it is attainable.
If you don’t have an emergency fund, or even a savings account, you’re in good company.
It’s estimated that up to 76% of Americans are living without any kind of financial safety net.
With things like food and gas prices creeping up, along with all your other expenses, do you ever wonder where in the world you’re supposed to find the extra money now for an emergency fund?
Don’t panic. Start with some of these ideas and see if you can get your own saving momentum going.
One of the biggest problems people face when setting out to create an emergency fund is they just don’t have a lot of extra money.
The good news is that you don’t have to sock away hundreds of dollars each month if you can’t. One way to squeeze some extra money out of your monthly budget is by paying close attention to how much you are allotting paying for bills.
For example, if you budget $100 for your electric bill, but it only turns out to be $70, that’s a $30 difference that you could be putting into your emergency fund. If you use this solution across a variety of bills such as:
You might find yourself surprised at how much you really can save. Bonus: you’ll use less energy too.
We all know it’s easier not to spend money when you don’t have it, so resist the temptation and just set up an automatic savings plan to take money out of your paycheck every month.
The amount you set is up to you and soon you won’t even notice that the money’s gone. Over the next months and years, you’ll grow a nice little fund that you may have just forgotten about—that is until you really need it.
Instead of overwhelming yourself with feeling like you’re on the verge of financial ruin, set small goals that are achievable and will help you get the ball rolling.
The Simple Dollar says that setting a first goal of saving $1000 will help you gain confidence in your savings ability, especially before pursing subsequent goals like saving for a month’s worth of expenses and then finally 6 months’ worth.
Breaking down a big job into manageable bits is nothing new, but it as some of us (myself included) tend to think I have to do it all NOW, it’s refreshing to see that even making small steps can lead us to the end of a big journey.
Sometimes the best way to save money is to let it grow.
Instead of letting your savings languish in a regular savings account, consider putting your cash into a money market savings or CD account that offer higher interest rates, while still allowing you to access your cash should you need it.
Most savings accounts are currently offering a piddly .01%, which means if you had $1000 in your account for 3 years, you’d be “rewarded” with an astoundingly sad 30 cents.
If all else fails and you still feel like you have nothing to save, try a spare change jar. Sure, you aren’t going to be able to save thousands of dollars this way, but you might be surprised how those little coins add up fast.
One friend of mine was surprised to learn she had over $250 in her jar, enough for her to pay for an unexpected car repair that sprang up.
This growing up thing is hard isn’t it?
Do I want to save my “extra” money in a fund in case I lose my job? Who wants to think about that?
But let’s be honest, we live in somewhat uncertain times and the idea of having some extra cash set aside specifically available if the worst happens, well, that helps me sleep at night.
And we all know that a good night’s sleep may be even more important than an emergency fund.