Life doesn’t always happen according to plan. Rainy days are inevitable; an appliance breaks or your car needs unexpected repairs. If your finances hit rock bottom, getting out of debt can become unrealistic, especially if you don’t have an emergency fund. Therefore, understanding how to build an emergency fund and actually building one can relieve you of some of the unexpected financial burdens that may come your way.
How to Build an Emergency Fund
First, you need to remember that any money you can save is better than none.
- The simplest way to grow your fund is to automatically transfer 5-10% of every paycheck directly into your savings account. What you don’t ever see, you won’t ever miss.
- Try to cut back on unnecessary expenditures. For example, try to pack your lunch or make coffee instead of buying it. If you know you usually spend $30 per week on lunch and coffee, you can now transfer that money into your savings account.
- Transform your passion into a worthy side hustle or second job. Use the money you receive from cleaning houses, babysitting, tutoring, dog walking, blogging, etc. to build your emergency fund.
- Out with the old, but not for free! Spring clean your garage, attic, and closets and have a yard sale or sell your stuff online.
- Start by saving $1,000 for the most immediate of expenses. Then, work your way up to 3-6 months of savings to cover living expenses in case of job loss or any big financial hit.
Mentioned above are some of the most basic ways to build an emergency fund. The important thing to remember is that you need to set a goal! Your budget can help you understand the type of money you need to for everyday expenses. Set the saving goal early on and work towards that. If you are unsure as to where to begin, do not hesitate to reach out and get some financial counseling.
I Have Reached My Goal, Now What?
Pat yourself on the back! You did it! This means you are able to stretch your goals a little more! Put a little extra effort to grow and build an emergency fund. More importantly, do not dip into those savings at any cost, unless of course, it is an emergency!
Check out the following video for more information on how to build an emergency fund.
Speak with a certified counselor at ACCC today to evaluate your budget! Call 800-769-3571.