Managing your finances can be a struggle if you are not someone that is organized.
Part of organizing your finances requires you to have an emergency fund. That’s just good, sound financial planning.
But many people are under the false belief that they don’t have enough funds left over after paying all their bill to put a little bit aside for this kind of fund. Nothing could be further from the truth.
With some belt tightening and smarter decision making, practically anyone can build up their savings. If you do not yet have one, it is not too late to start this kind of savings account.
Below, we will talk about some of the top tips for building an emergency fund.
Top Tips for Building an Emergency Fund
Where should you start? What should you do next? Should you open a new savings account for this fund? When should I use it? These are the questions we’ll be answering in this blog post. Let’s get going…
1. Determine Your Needs
The biggest thing that you should do when you are looking to ramp up your savings is to figure out how much you need. You want to have a specific goal in mind when you are looking to save money.
Your savings goal should be determined by various factors such as your income, expenses, and responsibilities. In general, you want to save anywhere from 4 to 8 months worth of regular expenses. Instead of looking to replace your entire income, simply focus on the bare necessities that you would require during this period of time.
Whenever dealing with an emergency, you are not going to be looking to fund night’s out or any other luxury that you might look to spend money on in a nonemergency situation.
2. Figure Out Where to Keep It
Another top thing to decide when you are looking to save up for unexpected financial difficulties would be where you will be keeping it. You will want to choose a place that is going to be easy to access. However, you want to also have some hoops in place so that you are not tempted to take money out and use it for everyday spending.
Thus, you might want to opt for a separate account from your normal checking account.
That way, you can completely separate it from your regular spending money. A good option for this might be an online bank since you will not be able to easily walk into the bank and withdraw your cash as you would normally.
You might even want to separate your rainy-day fund and place it into different accounts in order to hedge against your temptation.
3. Pay It Every Month
Another important thing that you should be doing when it comes to saving up for an emergency is simply paying it every month as you would a normal bill.
By giving yourself a set price that you have to pay each and every month towards your savings goal, you should be able to achieve the goal at a much faster rate than you would if you didn’t set a goal, to begin with.
You might even want to set up an automatic transfer which is going to further remove any sort of temptation that you might have to spend the money that should be going towards your fund. This can really help you remain as consistent as possible with your payments into this crucial savings account.
4. Use Only for Emergencies
Another major thing that you should focus on when you are looking to save money towards your emergency fund is to only use it for emergencies. The account you set up should never be used in instances that are not deemed emergencies.
If you have a set bill or payment that you have to make in the future that you already know about, it is not an emergency. Thus, you should not be dipping into your emergency fund in order to pay it off. Instead, your fund should be off limits to anything but something deemed an actual emergency.
You CAN Pull This Off…
Overall, there is plenty you can do to increase your chances of achieving success with your efforts to save up for a financial crisis. By having this type of safety net set up that is going to be sufficient for you and your family, it should help alleviate any sort of financial stress or pressure that you may have.
After all, you will be able to rest much easier knowing that you are going to be able to pay your bills and live for a good amount of time without having to worry about a steady paycheck to do so.
Having an emergency fund can really help in many ways and following the tips above is the best way to ensure that you have one and keep one.