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An emergency fund is money that you have tucked away in a savings account for the emergencies that you know will happen. Whether it is a suddenly leaky roof or a car tire that has to be replaced, you are going to face expensive emergencies, and you will not have to rely on credit to fund them if you have a proper emergency fund. Start with putting around $1,000 to $2,000 dollars aside for emergencies, then work towards building a fund containing three to six months worth of living expenses. The following tips will help you find the money to start saving.
Start Saving Anything
Many of us live on a bare bones budget, with little extra to tuck away. Even if all you can do is put $50 a month in an account, start doing it. The money will eventually add up, and you will feel confident knowing you have some cushion should the unexpected happen.
The only way to make this work is to treat payments to your emergency fund the same as any other bill, and to give it top priority. Pay yourself first and your other bills second. Then, put the money in a fund that is not quite so easy to access. You want to be able to access it if you have a true emergency, but you do not need to be able to access it if you use up all of your grocery money eating out that month.
Make It Automatic
One of the easiest ways to ensure that you are saving your money is to make saving automatic. Try to find a bank account that lets you make automatic deposits. Many of the online banks will automatically withdraw funds from your primary bank account to put into the savings account. It’s much harder to save money once it hits your bank account, so make the savings payment automatic.
Start with a Budget
You may not be able to see a way to stash money in an emergency fund. If you are in this situation, start with a budget. Take a month or two to monitor where your money is going. If you track your expenditures for a period of time, you will quickly see where you are wasting money that could be used towards your emergency fund. If you are like the average consumer, you have little idea of where your money is going.
Cut the Extras
You do not have to live like a miser, but if you can cut some of your extra expenditures and put money in savings, your future will look much brighter. Make your own coffee at home instead of stopping at the coffee shop. Pack a picnic for a family outing rather than stopping at the fast food restaurant. Your budget will show you where some of those extras are, so start working on it now.
Remember, if you sacrifice a little today to build your emergency fund, you will be less dependent on your credit cards, and will instead be able to use them to your advantage if you want to. When a true emergency hits, you will have the cash to deal with it.
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