We all know that it’s important to have a savings for a rainy day, but a lot of us don’t have enough space in our monthly budget to add to this fund.
Life is full of unexpected events and a little bit of a cushion should be part of your financial plan, but you need to make it a priority.
Here are some tips for starting an emergency fund:
1) Set Reasonable Goals For Yourself
Set savings goals that you can reach and that make sense for you and your family.
Start by putting away an amount that makes you comfortable and try building it up to a minimum of three months salary.
2) Keep Track Of Your Goals Weekly
Track your goals and keep yourself in line. If you review your spending weekly or even daily (online or via a budget app on your phone), you will be more conscious of your finances and more likely to stick to it.
By spending $50 less a week, you could save $2600 in just one year. But without a firm commitment to free up the funds, you’ll never find them.
3) Make Saving a Non-negotiable Expense and Find Places to Cut Costs
Build the expense of savings into your monthly budget and make sure that you give that payment as much weight as you would your utility bill.
Be just as disciplined about your savings! Look into monthly expenses and figure out what you need versus what you want. If you are having trouble, try to rank your non-essential items and see what can fall off the list.
4) Don’t Discount the Cost of Risk
A common reason to postpone putting money into a savings account is because of debt accrued through credit cards, loans etc. While it makes sense to pay off debt instead of putting money away because of interest rates, if a financial emergency comes up and you don’t have cash, you will need to turn to high interest credit cards or loans.
5) Make it Hard to Get To Your Money
It will be easier to save money if it isn’t easily accessible. Look into a savings account that has an interest rate, no fees and make sure that isn’t connected to an ATM card.
The harder it is the access the better so that you can’t get to it in an ‘non-emergency’ situation.