Saving for an emergency can be difficult, but no matter what way you look at it – saving for an emergency is a necessary evil. According to CNBC, 51% of Americans have less than three months’ worth of savings. Do you fall into that category? Saving three months’ worth of income is an intimidating feat; that is why we want to help you jumpstart your emergency fund. Here are eight simple steps from our financial experts that are sure to help you make headway on your cash reserve and bring you financial security and peace of mind.
What is an Emergency Fund?
From a broken bone to an unplanned job loss, emergencies will happen no matter how careful you are. The good news is that even though there may not be a way to prevent emergencies, there are ways to plan for them!
An emergency fund is simply a stash of money that is set aside to cover any financial surprises that life may throw your way.
Why is it Important to Have an Emergency Fund?
Emergency funds work to keep your stress levels down in those situations as you know that financially you are prepared. In turn, an emergency fund is sure to provide you with the confidence needed to tackle any emergency life throws your way. Emergency funds should be in an interest earning bank account or savings account that is easily accessible and will not incur a fee or penalty for withdrawal.
How Much Money Should I Have in an Emergency Fund?
In a perfect world, an emergency fund should have three to six months’ worth of expenses, but we understand how intimidating such a large number may be. We suggest working towards an emergency fund of $1,000 first, then seeking to grow that number over time.
8 Steps to Jump-Start Your Emergency Fund
1. Outline your budget and stick with it.
In a previous blog post, we told you all about creating a budget to help you gain control of your finances. The thoughts and theories surrounding the importance of following a budget are key in growing an emergency fund.
2. Re-evaluate all your reoccurring bills.
How do you pay your bills? Do you send in a check? Do you pay online, or is the money withdrawn automatically from your account? Automatic reoccurring bills are easy to set up, but they are also easy to forget about. Maybe you signed up for a streaming service that was free for a week, and you then forgot to cancel. We want to encourage you to go through all of your reoccurring payments and make sure that there are not any that you might need to cancel.
3. Cancel any unnecessary subscription services and memberships.
These days, subscription services and memberships are easy to acquire. Maybe you signed up for a food subscription service free promotional period and never canceled. Or maybe you pay for a gym membership that you do not use. We encourage you to go through your monthly credit card or bank statements to look for reoccurring subscription charges and cancel any unnecessary services.
After canceling any memberships that you do not need, we want to encourage you to take that “extra” money and add it into your savings account on a monthly basis.
4. Create a monthly savings goal.
While reviewing your budget, now is the perfect time to figure out how much you are able to set aside for your emergency fund each paycheck. Keep in mind, no amount of money is too small. Maybe you can just set aside $20 a month, or maybe you have room in your budget to set aside upwards of $1000. Whatever the dollar amount, make sure that it is on your budget and that you can continue to add that same amount on a monthly basis.
5. Sell things you don’t need to start your emergency fund.
One of the easiest ways to grow your emergency fund is by selling stuff you no longer need. Go through your closets, drawers, and garage to see if you can find items that you would be willing to part with. A garage sale may be the quickest option for selling many items at once.
Selling items that you no longer need is a wonderful way to grow your emergency fund!
6. Boost your income with the help of a part-time job.
Consider taking on a part-time job, starting a side business, or even working overtime. Those little efforts could mean a lot for your emergency fund growth and help you accomplish your savings goals in no time! Do you have a hobby like art or knitting? Make some projects to sell online to add to your emergency fund.
7. Sign up for rewards and loyalty programs.
Reviewing your monthly expenses probably shows you the stores in which you complete most of your shopping. It is important to see if these stores have loyalty programs that can help you earn cashback or member benefits that work to reduce your monthly spending with those stores in mind.
8. Stop paying for convenience.
These days technology means you can have groceries delivered to your door or even call a car to drive you to your next location. No matter the convenience you are paying for, it is important to understand that you are doing so at a cost. Though this convenience is easy to turn to, these tasks can do a number to your budget. If you do order food, choose pick up over delivery to lessen the cost on your budget.
Start Your Emergency Fund Today!
If you want to save money quickly, you have to start with a plan, and we want to help you become your best financial self.
If you are looking for more insight into how you can grow your savings quickly, don’t hesitate to contact us. We are here to help!