An emergency fund is the best thing you can have by your side during a tough time. What if you suddenly lose your job or become ill? You’ll need some finances to keep you going and pay your bills.
You need to start saving for some emergency funds as soon as possible. Here are four ways to do so.
Remember, the ultimate goal is to save for several months. That can be quite overwhelming, given that you have living expenses that you can never avoid. Living expenses can leave you with nothing to save.
Don’t give in to such a mentality; start small by having an account buffer. Account buffer protects you from small and unexpected expenses that can see you digging into your savings.
The momentum you put up building an account buffer can keep you saving until you build a good emergency fund. Both account buffer and an emergency fund can be the same thing, but at some point, you’ll have to separate them for different purposes.
You can use the emergency fund in case of emergencies and use a buffer account to sort out regular small expenses.
Let It Be for Emergencies Only
Your emergency fund should be strictly for unexpected expenses and no regular expenses. Avoid using your emergency fund for non-emergencies such as dining out.
Ensure you separate your emergency fund from your regular checking account. You can also earn interest on your emergency account because it’s among your protected goals account.
The more money you keep in your emergency fund, the more interest you will earn. If you prove that you’re disciplined at saving, you can unlock your chances of qualifying for a good emergency loan online.
Create a Budget
You cannot have a good emergency fund without a budget. By budgeting, every money in your pocket counts. An emergency fund should be top of the list of your budget.
Budgeting will help you separate what you need and what you want. This way, you can cut down on things you don’t need and divert that money into the emergency fund.
Also, ensure you save before spending and don’t misuse any money left after your savings and spending. Instead, get that money back to an emergency fund.
Have a close look at your budget regularly to wade off things that aren’t necessary. Any amount you cut off from your budget should go to your emergency savings.
Look for Another Source of Income
Looking for another source of income doesn’t mean you have to quit your current job. There are many ways to grow your income.
It can involve starting a side hustle or working overtime. Consider asking your employer for a little raise if you think your work deserves it.
You can also sell those used items that are idle at your home. You can as well take on flexible part-time jobs such as driving and walking pets. The goal is to have some extra income that you can direct to your emergency fund.