If the pandemic taught you anything, it’s that you can’t always predict the challenges you’ll face in the future. Bad luck and unforeseen circumstances team up, often delivering expensive bills you weren’t expecting. Health issues, car troubles, and household repairs take money to fix, and your paycheck isn’t always big enough to cover it all plus your usual bills.
An emergency fund is there to bail you out if you need money now and don’t want to take out an installment loan online. That’s the golden rule of finance 101, but what’s less obvious is how you go about making these savings. If you need some help building an emergency fund that’s ready to help in a crisis, this guide is for you.
How Much Savings Do You Need to Be Safe?
Safe is such a personal word. Its meaning is different for everyone, even if they face similar financial challenges. Your definition will depend on your tolerance for risk and lifestyle. That said, the financial community suggests saving between three and six months of expenses. Although this may seem like a big goal upfront, it gives you the financial freedom to handle small and big emergencies in stride.
A six-month emergency fund could realistically keep you afloat during a layoff or significant illness. Alternatively, you can tap into it whenever you need help replacing a household appliance or repairing your car.
What Happens if Your Savings Aren’t Enough?
If you’re lucky, you won’t encounter an unexpected bill before you’ve developed your emergency fund. Life, on the other hand, might have other plans. You might have to fix a leak in your roof when you’ve only just started to save. What then? First of all, don’t panic. You can find online installment loans that act as a safety net in these stressful situations. Some online installment loans for bad credit are even available if your credit score has seen better days.
Take the time to review the options available for your credit score, comparing online direct lenders and their loans online. This step helps you find the best rates possible with your financial profile. Read more about Your Guide for a Better Handle on Your Finances.
3 Tips to Save More Money Today
Whether you want to top up your emergency fund or start one from scratch, these three tips can help you put more savings aside each month.
1. Use Your Budget to Cut Spending
You’ll want to track your spending to see if there are any purchases you can reduce or eliminate entirely. Any spending you manage to cut will free up cash you can put towards your fund. Not sure what to look for? Here are some spending red flags:
- Too many streaming services and subscription boxes
- Frequent fines (parking, library, late fees, etc.)
- Upgrading mobile phones when you don’t need to
- Paying for an extensive phone and Internet plans you don’t need
- Takeout and food waste
2. Boost Your Income
If you’re already living on a shoestring budget, you may not have the flexibility to cut expenses and save more. When subtracting spending isn’t possible, adding income is your next stop. Consider your future at your current place of employment. Is there a way to move up in the ranks and earn more money?
If a promotion isn’t the works, you might want to pick up a part-time job in your off-hours or pursue a side gig that leverages your hobbies into paying jobs.
3. Automate Your Contributions
Once you cut spending or boost income, set it up so that you send this extra money into savings automatically. Automatic contributions make everything easier, as they also force you to save and prevent you from spending what you pledged to your fund.
Saving takes work, so it may take a lot of effort and time to grow your fund as big as six months. But it is possible! Remember these tips to help you get started.