An emergency fund is money set aside to cover large unexpected expenses. When an emergency arises, whether it be unemployment or a car accident, you usually have bills to pay. Unless you borrow the money you need, putting yourself in debt, the only other option you have is savings. Unfortunately, saving several months’ worth of expenses is difficult, especially when living on a tight budget. With that in mind, here are six easy ways to build an emergency fund.
1. Break Down Your Goals
Saving an emergency fund can be a daunting task when you focus on the total. However, that total figure is made up of many smaller parts. While $100 seems like a large sum to put aside every month, $3 or $4 a day is easily achievable. By focusing on small goals rather than larger ones, you’ll find it much easier to build up a sum of money that would help you in an emergency.
2. Open a Savings Account
Although keeping your emergency savings in your everyday bank account is convenient, that convenience is a curse more than it is a gift. With a large sum of money so easily accessible, you’ll be tempted to spend your savings when it isn’t an emergency. This means that, when an emergency does arise, you won’t have enough cash available to cover any unexpected costs.
3. Trim All Everyday Costs
Even small savings add up. Because of this, you must find ways to trim your everyday costs. You could take the bus to save on gas and pack lunches instead of buying them. Among the many other benefits, you can learn about at Green Dot reviews, opening a bank account with Green Dot allows you to earn cash back on purchases. This money could then be put aside.
4. Make a Side Income
Although cutting costs will help, there is only so much money you can save. For this reason, you should look for ways to earn more money too. There are many side income ideas that you could consider, from blogging to tutoring. Other options include working a second job part-time, like bartending, and opening an ecommerce store to sell either new or used belongings.
5. Clean Up The Account
Having money left in your account at the end of the month is a happy occasion. However, that doesn’t mean you should waste the cash to celebrate. Instead, move whatever money is left over into your savings account.
If you don’t want to save it all for emergencies, then put some of the money aside for treats instead. With this fund, you can pay for days out and family vacations.
6. Set Up Automatic Transfers
Many people automate their monthly bills. This not only saves time but ensures that no payment is forgotten, which helps to avoid any late-payment charges. Automating your savings is also a good idea. Without automation, you might forget to put money aside or put it off, which would make it harder for you to build an effective emergency fund.
Building an emergency fund is a daunting task, but the advice above should make it easier.