According to financial experts, it’s a good idea to have six months to a year’s worth of savings set aside to cover emergencies that may occur. If you are like many people, the thought of setting aside even a small savings fund for emergencies can seem impossible. With these six easy steps, you can not only save, but also boost your emergency fund over time.
1. Establish savings goals
After setting your goals, make them a part of your monthly budget. Think of savings as another monthly bill you have to pay. Set up an entirely separate bank account just for your emergency fund, and ask if your employer offers the option to automatically route funds from your paycheck into a savings account.
2. Track what you spend
Keep a financial ledger and note what you spend daily. Break expenditures into categories and assess where you are spending the most every month. Chances are, it may also be where you can save the most. There are several online tools that track finances and help you create a monthly budget, as well.
3. Spend less where you can
You don’t necessarily have to give up dining out or cable TV to save for an emergency, but by making a few adjustments to your lifestyle, you can spend less and save more. Opt for a smaller cable package or cell phone plan, and eat lunch out one day a week instead of five. Bank the savings regularly.
4. Save more by earning more
Find creative ways to earn additional cash, such as selling items on Craigslist, turning your hobby into a money maker, or by taking a part time job.
Even something as simple as setting your change aside at the end of the day and then transferring the cash into the bank once a month can really add up and boost your savings over time.
5. Don’t touch what you save
As tempted as you might be to dip into your emergency fund to bolster a vacation or buy something you “just have to have,” don’t give in to the urge to splurge. Limit how easily you can access emergency savings by using an online bank or a money market account, preferably without debit card access.
6. Increase your savings over time
After you’ve reached your initial goal, boost your target savings amount every few months. Once you’ve gotten into the habit of saving you may even find it easier to make larger deposits as well, such as putting all or part of your income tax return into savings. Before you know it, you’ll have a healthy emergency fund on hand when you need it.
Sources: Bankrate, US News, AOL Financial, The Simple Dollar
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