Emergencies and unexpected expenses can sometimes happen at the most inopportune time. It is for this reason that you need to establish and grow an emergency fund. An emergency fund is an essential tool for a good personal finance life since it can help you avoid unnecessary debts.
Life is full of ups and downs, and sometimes an unexpected leak in your roof can get you into a huge debt if you had not set aside money to cater to such emergencies.
Whenever you find yourself in a financial crunch, your emergency fund can give you the safety net to fall back on until you get back to your feet.
However, building an emergency fund requires discipline, patience, and a lot of sacrifices. Here are some simple tips to help you jump-start your emergency fund and avoid having to apply for an emergency loan.
Review Your Budget Regularly
A well-prepared budget is an essential financial tool that you cannot afford to ignore. However, having a static budget won’t help you so much. Develop a habit of reviewing your budget regularly to ensure your savings and spending needs are still in line with your financial situation.
While reviewing your budget, be sure to ask yourself whether you could be saving more. For instance, if you have allocated $200 to dining out each month, see if you can cut it down to $80 and channel the extra money towards your emergency savings.
The same thing applies to the other categories on your budget list, such as entertainment, personal care, and clothing allowance.
Take It Day By Day
The truth is that saving a months’ worth of living expenses may seem like an impossible mission to accomplish. But, the most important thing you need to do is to get started.
Once you have saved a few dollars, you’ll find ways of ensuring that you grow your emergency fund.
At the start, pick a realistic figure that you believe you can achieve in the short term. For instance, you could start with a goal of saving $50 or $100 in a month then find a way of moving forward.
Look for Simple Ways to Boost Your Income and Cut Expenses
Increasing your income and cutting back on unnecessary expenses can make a significant difference. Storage lockers, garage, closets, and basements can be a real goldmine for all the stuff you no longer need.
Clean them up and put all your old or unused items on sale. You will be surprised by the number of people who are willing to pay money to get some of those items.
You should also consider getting a part-time job to boost your income. For instance, if you enjoy writing, consider venturing into the world of freelancing and start writing paid articles or blog posts.
You can even fill out surveys, sign-up for paid focus groups, or run errands to earn some extra cash. Channel the excess amount of money you earn from such side hustles towards building your emergency fund.
Automate Deposits into Your Emergency Savings Account
Consider setting up a separate emergency savings account and automate deposits into the account. This way, you won’t find it hard to move money from your checking account into your savings account.
Fortunately, you can automate things yourself through secure online banking. By scheduling automatic deposits into your emergency saving account, you don’t have to remind yourself to transfer money manually. Consequently, you won’t be tempted to spend it on something else.
The reasoning behind this is that if you cannot see the funds idling in your checking account, you cannot waste it.