Let’s be honest, money is and will always be our biggest struggle. Every time I try to save or build a saving strategy, I think about the amount of money I’d have to put through, and talk myself out of starting. But life rarely goes the way we want it to go. Urgent events (health issues, accident, urgent need of money) happen sometimes and I regret not having started saving through an emergency fund.
So this year, I’ve decided to build an emergency saving fund, and I’ve found 5 ways to follow that I’d like to share with you.
It’s always good to have money put aside for urgent things that might happen in your daily life. To do so, why you don’t you start by avoiding being ruined financially ?
1. Determine how much you need
You first need to start by setting a specific goal in mind that will serve this emergency fund. The thing is that this saving goal needs to be targeted by saving enough to cover 4 to 7 months’ worth of expenses. And of course, you’ll need to set this goal depending on your yearly/monthly income, charges and fees.
Everyone of us has their own wants & needs when it comes to spending money, but you’ll have to focus on getting enough saved to cover expenses while setting your saving goal, instead of focusing on replacing your entire income.
2. Decide where you’ll keep this fund
The aim of building an emergency fund is to make it easily accessible. But you have to make sure it’s not that easily accessible to let you be tempted by making withdrawals every time you need cash.
Try to use an account that is away from your normal checking account. This will help you build a psychological wall between two concepts: Daily spending habits, and emergency money needs. You can also try putting your money into savings bonds or lock box at home.
3. Treat it like a bill
You have to make this saving goal part of your regular budget. Many finance experts recommend what they call forced savings, which consists in setting up an automatic monthly transfer, just as you do for your regular bills, such as electricity or fitness club membership. This will help you being sure that money is saved every month, but also will it help you build your fund steadily. But don’t forget to make sure you have already created a balanced budget to avoid facing troubles like not having enough money to pay off your charges.
4. Use it ONLY for emergency
You have to be 100% convinced that this saving fund is for unexpected events and emergency ONLY. This might include:
- Appliances not working anymore
- Getting laid off from a job
- Sudden illness
The only way to avoid using this fund for any other reason than emergencies is by making it difficult to access. Don’t use a debit card neither a checkbook.
5. Take it slow ;)
Building this emergency fund will take time, and you have to be conscious of this fact. Take your time, and more important, take it slow. If you transfer $10 every week to your saving account, you’ll get $500 by the end of the year.
Experts say that starting with small amounts of savings shouldn’t scare you. You can do so and try your best to increase it whenever it’s possible.
The point is that, the more you add, the more you get. If you ever happen to get a commission check for example, add it to your fund, instead of spending it in shopping or on a restaurant bill.
You can also turn your passions into money resources. If you love crocheting, teaching, creating jewelry, crafting, turn these lovely hobbies into a source of effective income. This will simply boost your savings and you will see them soar ;)