Many people find themselves struggling to stay within their budget. As they live from month to month, the concept of building up an emergency fund or savings account seems out of reach.
But having funds set aside for unexpected expenses or an emergency can save you from financial stress that possesses the potential to spiral out of control. Whether an emergency consists of a small car repair or a huge medical bill not covered by insurance, having to dip into the money you use for bills to take care of the emergency can create a snowball effect that takes months to stop. Consider these ways to quickly (or steadily) build up an emergency savings fund so you won’t be caught off-guard and placed under financial pressure in the event of an emergency.
You Can Build an Emergency Fund
- Make Simple Budget Cuts. Small purchases made on a regular basis add up over the course of a month. A cup of coffee to go every morning before work can add up to $60 or more per month. If there are other small expenditures you make regularly, it might be time to re-examine whether or not you really need to make them. By bringing coffee from home and your own brown bag lunch, you can save money and put that in your emergency fund.
- Build Savings into Your Budget Plan. One way to get the emergency fund money to add up fast is to get in the habit of paying yourself first each payday. When your check arrives, immediately put a predetermined amount of money into your emergency fund account. After that, pay your bills and take care of other financial obligations. The money will add up fast.
- Automatic Deductions. Have money taken out of your paycheck and deposited into your emergency fund account before it reaches you. Automatic deductions are a great way to build up your emergency fund without the excuse that the money has been spent on bills and there’s none left over for savings. Most employers have automatic deductions, which can be made in any amount that works for you. Start out with an amount that’s doable for you, and then increase it when you’re able to.
- Bonuses and Extra Money. Extra money coming in that you didn’t expect should go directly into the emergency fund. Place income tax refunds, dividends, employee bonuses and any other unexpected funds into your emergency account to beef up your balance. You can also add any monetary gifts you receive at the holidays or other special occasions to your emergency fund. If placing bonus money into an emergency account is something you know you’ll never do because you’d rather spend it, then divide the money so most of it goes into your emergency fund and the rest of it is fun money.
- Earning Extra Income. The lack of an emergency fund places you at-risk for serious financial stress if something should happen. If all else fails and you have no other ways to save, it might be wise to look for other income-earning options. Work over-time, if possible, take on work from home or participation in paid medical trials, such as those at volunteers.gsk, is a quick way to bring in extra cash.
Preparing for Now and the Future
It’s in your best interest to keep your emergency fund separate from your general savings. But if a tight financial situation doesn’t allow you to do so, then build up your emergency fund with the intention of separating them later. As you use these five considerations to grow your emergency fund, you’ll begin to feel more secure about being prepared for the unexpected. Having that sense of security is good for your financial well-being, and it helps you feel more confident about your finances overall. Once you start your emergency fund, continue adding to it on a regular basis.