Having the money available in case of an emergency can help you pay for unexpected expenses without acquiring more debt, so be sure to use these 10 ways to build an emergency fund. You’ll have a way to cover these expenses, which can relieve stress and allow you to focus on the more important things in life.
10 ways to build an emergency fund.
1. Set a Goal
Without a clear goal, it will be hard to determine how much you need to save. You may want to put away three month’s worth of salary in the event that you come ill or lose your job. You may want to save more than this to cover the cost of potential car problems or other financial emergencies. Once you have your goal set, you know how much work you will need to do to save.
2. Pay Yourself First
Before you spend a dime of your paycheck on bills, groceries, or entertainment, transfer a portion of your check to your savings account. The percentage you take out will depend on how much you can afford to spare, but remember that even one percent of your salary will build up over time.
3. Open a Separate Savings Account
Having an account that is linked to your debit card or checking account makes it too easy to transfer money for non-emergency expenses. Choose an account that has a higher interest rate, if possible, and make sure that you remove any temptation to spend your savings by keeping it separate from the rest of your accounts
4. Take a Temporary Job
While you may not want to work two jobs permanently, taking a seasonal job around the holidays can give your emergency fund a quick boost. Divert most or all of this second income to your savings for a fund that takes just six weeks or so to build.
5. Sell Your Old Items
If you have old electronics, clothes, or furniture, consider having a yard sale or listing these items online for sale. You can then take the proceeds to the bank to add to your fund.
6. Turn Your Hobbies into Profits
If you are crafty or you like to build things, you can make money off your talent. There are many websites that allow you to sell your homemade goods to customers around the world. You can use the profits from your hobby-turned-business to pad your emergency fund.
Cutting costs is always a good idea, but you can reduce your spending and add to your emergency fund relatively easily. If you are able to lower your costs on entertainment, groceries, or other expenses, you put take the amount that you saved into your savings account. If you save 20 dollars at the market, that is 20 more dollars you can put into your savings.
8. Take it Slow
While you may be in a hurry to build your fund fast, you don’t want to save too aggressively only to find out that you need to dip into your savings to cover your basic necessities. Over-saving can actually cause cash emergencies instead of preventing them. Take it slow and save at a pace that works for you.
9. Turn in Your Change
You might be surprised how quickly your change adds up. Check your couch cushions and car, and turn in the money in your piggy banks. Many people are astonished to learn they have a few hundred dollars just sitting in their homes.
10. Talk to a Financial Planner
Sometimes it’s difficult to know which bank accounts and savings options are the best for you. Having a consultation with a financial planner can give you a blueprint for not only your emergency savings fund, but also for how to strategize your spending as a whole.
Once you implement these 10 ways to build an emergency fund, you will find that savings come easy. You may even want to continue saving after you meet your goal to pay for a vacation or other exciting treat.