Sh*t Happens: How to Create an Emergency Fund
We’ve all been there, the washing machine breaks down, there is an issue with the car, and we need to put the bill on a credit card. There is nothing wrong with that, but if we don’t have the funds to pay for the bill, we are just pushing ourselves further into debt.
What is an emergency fund?
An emergency fund is a perfect way to ensure that when stuff happens, you have a backup to lean on. There is no need to panic about fixing your car, the washing machine that went kaput or losing your job. Instead of having to scramble to find the money, the funds are waiting for you in your emergency savings account.
How to build an emergency fund
What is the first step to building an emergency fund? Start small. So many people have a huge goal to save tons of money, say six months of living expenses, but I’ve seen people get discouraged with this and stop saving.
The idea is to start with a more reasonable goal – start to plan to save $600. This is easy to manage and can be accomplished in a few months. This can make a substantial difference when in an emergency.
To make this even easier to swallow, say you would like to save $600 in 8 weeks, that is $75 a week.
How to find extra money to save for an emergency fund
Auto and Home Insurance:
We pay a lot of money for auto and home insurance. Look into switching and save the extra money that you would have spent on the original plan.
Use a grocery list:
If you are like me, I often go to the grocery store to buy 3-5 items and then walk out with two full bags. By planning before walking into the grocery store, you can stay focused on what you really want and save the extra funds.
Use Public Transportation:
If possible try using public transportation, it is usually cheaper than a car and can help you save money.
Trim monthly bills:
Do you really need to be paying for 300 premium channels? Call your cable provider and adjust your cable package. Call your home phone/Internet company and check your average usage for the past few months and adjust the package accordingly.
Resist the temptation to spend
There is always something to spend money on – things that are not real emergencies, i.e.: your friends found a deal to the Bahamas for the weekend. You simply have to resist the temptation. I know, easier said than done, but just think about the next time your car breaks down and you don’t have to fret about finding the money – it’s saved and ready for action.