Tag Archive for Emergency Fund

How to Start an Emergency Fund with a Low Income

emergency fund

start an emergency fundEveryone knows that it is a good idea to have an emergency fund available for those costs that sometimes pop up in life.

You can?t always predict when you are going to need to spend some money, so having an emergency fund put off to the side for just such occasions is a good idea. However, it can be very difficult to build such a fund when you are only working with a relatively low income.

So, how can you build up your fund while still making ends meet each month? Here are some tips to?point you in the right?direction to start an?emergency fund.

Add It to Your Budget

The first thing you need to do is make this kind of saving a priority. If you don?t emphasize building up your emergency fund with at least one monthly deposit/transfer, you are never going to sufficiently pad your account.

As you are working on putting together a monthly budget, be sure to include at least a little bit for adding to your emergency fund. It would be great to add a significant amount, but even a small deposit can put you on the right track over the long run.

Pick Up Side Work

If you would like to quickly create an emergency fund, you could try to pick up work on the side as a separate income stream from your main form of employment.?Think of this money as “bonus” money that is going to exclusively be put into your emergency fund.

Since you should already have a budget sorted out for your month-to-month expenses based on your standard income, you can set aside the extra money you earn through your other work for the express purpose of building the emergency account. When you have your emergency account at a sufficient level, you can either quit working extra or divert that additional income toward other bills or debt.

Cut One Bill

Even adding something like $50 per month to your emergency fund is a great way to grow it over the long run, but you might not currently have room for that in your budget. You will, however, if you can cut out one bill for a similar amount.

Look through all of your monthly bills to determine whether or not you can reasonably cut out any of them. If you find a spot you can save, take the money that is no longer being spent on that former bill and use it to grow your emergency fund.

Give Up One Habit

Do you go for an expensive coffee each morning on your way to work? Do you go out to eat multiple times per week rather than cooking at home? Think about your day-to-day habits, like the latte factor, and try to cut on out (or at least cut back) in order to free up money that can be used for an emergency fund. You might be surprised to find that you wind up feeling better about saving the money than you did about indulging yourself in your habit.

 

How did you start an emergency fund? Can you think of other ways to find money to put in an emergency fund?

 

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3 Easy Ways to Start Building an Emergency Fund

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start building an emergency fundOne piece of the financial puzzle that many people fail to consider is a simple emergency fund.

This fund is nothing more than money in a savings account which is meant to be available in case of unexpected expenses. You can?t always plan for all of your costs in life, so having some money set aside in an account that is meant for a ?rainy day? is a great idea. The amount of money that you are going to keep in your emergency fund is up to you, but the first step is to build it up as quickly as possible.

If you need to start building an?emergency fund, here are three easy ways to get started.

Build It in to the Budget

Most people have a monthly budget that they use to keep track of their spending, but that budget often doesn?t include money that has been set aside for saving in an emergency fund. By adding a line to your budget that includes some amount of money to be put into the emergency fund, you can be sure that the fund will grow month after month. Even if it is something as small as $50 or $100, be consistent with your deposits into this fund and watch it grow as time goes by.

It’s best to automate this saving so it does the work for you, not to mention picking a bank that pays?something?in interest. Discover Bank, for example, allows you to automate saving and pays a decent interest rate.

Take Money from Somewhere Else

There is a good chance that there is at least one part of your budget that could be trimmed back in favor of adding to the emergency fund. For example, do you have any monthly expenses that you could simply get rid of without a problem? Many people carry a membership or two to things that they don?t actually use enough to justify the cost. Take a careful look over your monthly spending and pick out an item or two that can be eliminated in order to free up more money for adding to the fund.

Make Extra Money

This might seem like an obvious point, but it is something to consider on a short term basis. If you would like to build up an emergency fund but you just can?t seem to make it happen on your current income, consider a part time job or side hustle as a way of making extra money. You can plan on dedicating all of the money from this job to your fund, and you can quit the job once you have reached your savings goal.

The best thing you can do in order to grow your emergency fund is simply to make it a priority. You are inevitably going to have to make some sacrifices if you want to build up this fund in the near future, so commit yourself to the process and keep an eye on the big picture. It might mean that you don?t go out to the movies or to dinner quite as often in the months ahead, but that is a small sacrifice for the big gain that is seen when you have money set aside for unexpected costs.

 

Do you have an established emergency fund? What tips can you offer to help people start building an emergency fund?

 

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Why You Need an Emergency Fund When Paying Off Debt

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emergency fundSo, you have made it your goal to pay off as much debt as possible this year ? great! There is nothing quite like the feeling of getting out from under debt – you can live financially free and start to use your money on things you need and want rather than just paying interest charges and late fees.

Of course, paying off debt is one of those things that is easier said than done. Without a solid plan in place, you might find that you don?t make as much progress on your debt as you would like in the months ahead.

One of the things you need to think about while paying down debt is keeping an emergency fund in your savings account just in case of unexpected expenses. Think about it ? isn?t that how you got into debt in the first place? You ran into expenses that you weren?t planning on, so you put them on a credit card for the time being. As the months went by, you were unable to pay off the credit card as you planned, and you wound up in debt deeper than you expected. To avoid a repeat of that very scenario, be sure to put away a comfortable amount of cash that you can call upon if necessary.

No Downside

The beauty of keeping an emergency fund for unexpected expenses is the fact that you can always turn to that money if you need it. Obviously, if you are saving some money, you are doing a good job of living within your means at this time. If you can keep that up over the long term, everything should work out just fine from a financial perspective.

Even if you aren?t paying down your debt quite as quickly as you would like, holding on to at least a moderate amount of cash in your savings account can serve as insurance against going back into debt later on. The last thing you want to do is spend all of your money paying down debt only to have to put expenses right back on the credit card you just paid off because you have no money left in the bank.

Available for Other Purposes

There is a difference between having cash in the bank and having room open on a credit line. For instance, if you find yourself needing to purchase a car, you will want to have some cash available for a down payment. You can?t put a down payment on a credit card, so in this case, it would be more important to have the cash in the bank.

Obviously you want to pay down your credit accounts as fast as possible in order to avoid interest charges, but it is still important to keep some cash separate in an emergency fund. Being in debt gets old pretty fast, and having an emergency fund standing behind you at all times is a great way to feel like you won?t be headed back into debt anytime soon.

 

Do you have an emergency fund? Are you saving for an emergency fund while paying off debt?

 

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Three Reasons Why You Need an Emergency Fund

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Emergency FundOf course, we all hope that we would never have a need to use an emergency fund. In a perfect world, we would be able to plan our expenses well in advance, and make sure that we have the resources available to take care of our obligations.

Unfortunately, that isn?t how the world works at times. Large financial expenses come up from time to time, and you might not have much warning when they do. If you are unprepared for such circumstances, you may be left scrambling to make accommodations to deal with the expense and keep paying your other bills as usual.

For this reason, it is important to have an emergency fund available that you can tap into if something should come up. The size of your emergency fund is going to vary?based off your personal circumstances. My wife and I have an emergency fund that covers over six months of expenses as we’re self-employed, one of that size may be too large for you, but something closer to one or two months might be better. Regardless of the size of your emergency fund, it can provide?peace of mind, and can help you get out of a tough spot if something should come up.

Let?s look at three specific reasons why it is a good idea to have an emergency fund

An Emergency Fund Can Help You Stay Out of Credit Card Trouble

If you don?t have an emergency fund to use, a likely alternative for many people is going to be using their credit card. This generally is not going to be a reasonable solution, as it can cause trouble down the line if you’re unable to pay off the credit card on time. By holding onto some emergency money and being able to pay cash for unexpected expenses, you can keep your credit cards clear and avoid having to go into debt.

Sudden Unemployment

It isn?t a fun topic to think about, but unemployment is something that happens to many people at least once in their lives. If you should suddenly find yourself unemployed for a period of time, having an emergency fund available is a great relief while you try to find a new job.

Even just a month or two of money in reserve can greatly lessen the stress and pressure you feel while unemployed. It still will not likely be a fun time in your life, but at least you can keep up with your bills and focus on looking for new opportunities.

Add to Your Savings

By making a habit of adding a little bit to your emergency fund each month, you might find it growing larger than it needs to be over time. That is a good problem to have ? simply transfer the excess money to your savings account and you will suddenly have a larger pile of cash in your savings to use later on down the line. Think of your emergency fund as a second savings account that you are ready to use if needed, but are planning to hang on to and be able to use at your own discretion when necessary.

You don?t have to have a huge sum of money stored away in an emergency fund, but it should be enough to at least partially cover expenses that may arise. A little as a few hundred dollars can come in handy, so dedicate one of your accounts to an emergency fund and add to it a little bit at a time, when possible.

 

Do you have an emergency fund and if so, when was the last time you had to use it? How big is your emergency fund?

 

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