Creating an Emergency Fund

Creating an Emergency Fund

 

Unless you’re a millionaire, chances are you know that saving money is no easy task. However, it’s important to find ways in which to save. If and when an emergency arises, you’ll be happy that there’s some extra money in the bank to support you.Save, Save, Save
No matter how small of an amount you have leftover, save it! If you have only an extra $5 at the end of the week, put away into your savings account. It might not seem like much now, but after a year, you would most likely have enough to pay a month of car insurance if you suddenly lost your job. Keep coins too, and cash them in after you amass a significant amount.

Limited Access
One of the reasons why people have trouble saving money is that they have constant access to their funds in a savings account. In Leo Babauta’s article “21 Strategies for Creating an Emergency Fund, and Why It’s Critical,” the author suggests putting money in a place where you cannot touch it. For example, you could invest in a CD or treasury bond. The only problem with these suggestions is if there is an emergency soon, you might not be able to access it right away. However, these suggestions definitely work for a long term emergency fund plan. For example, if you feel as though you’re covered now, but are worried about health issues that may arise when you’re older, such a plan would work well.

Create a Budget
Many people also lose track of their money because they don’t have a budget; however, making one is as simple as knowing how to use Microsoft Excel. They have no idea where the money is going; they just know that it is going. Make a chart that tracks every amount that you spend. Create a line for mortgage/rent, electric, gas, car payments, student loans, credit card bills and so forth. After you have put in all of your necessary expenses, make a line for savings. Each month, make sure that you put that amount into your savings account.

Bonuses, Refunds, Gifts
Another idea that Babauta mentions is to put any extra money directly into your savings account. While you might be tempted to take a Christmas bonus and purchase that new bag that you’ve been eying, think about how guilty you would feel if there was an emergency down the road, and you had spent that money on a luxury instead. Consider gifts, tax refunds, bonuses and other unexpected money as little signs that you should keep it safe and stashed away, as opposed to spending it on items that you really do not need.

Often, people do not prepare for emergencies because they do not think they will ever be in such situations. However, no one is able to predict the future. It’s better to have some money saved up if unexpected expenses come your way than to be totally unprepared for any sort of catastrophe.

Katelyn Jennings writes about finance, family & improving her credit report.
Print Friendly, PDF & Email

Speak Your Mind

*