Ways To Build Your Emergency Fund
We all love to have money put away for special occasions. Certainly, it would be nice to simply have two or three thousand in the event you fancied a trip to Disneyland. But such things are luxury expenses and should be looked at last on your list of costs.
It is far better to have a bank account set aside for your Emergency Funds. This account is meant to cover a range of things, from car repair to unemployment.
Why do I need it?
If you can hack it, get high rate savings to account APY between 2.20% and 2.25%. It will keep you from digging yourself into a hole of debt with others.
According to Liz Weston, a NerdWallet correspondent, “One of the first steps in climbing out of debt is to give yourself a way not to go further into debt.”
Here are a couple of ways you can ensure that you have an Emergency Fund that provided a buffer of relief:
1. Set a Monthly Savings Goal
If you are in the habit of buying at least one luxury a month, you may find it hard to save. Like me, discounts may blind you the sheer mounting cost of piling on one product after another.
Instead of spending without thought, consider if it is a need or a want. For every want you determine, make that money part of your monthly savings goal. Whether you are depositing into an ATM or a clay piggy bank, give yourself a time frame to achieve that goal each month.
2. Keep The Change
Walking into a store with $20 or anything larger will often leave you with dozens of smaller bills. Put them in a covert place like a decoy soda can and watch the cash slowly add up. Store your ‘loose change’ in whatever container you like. Keep it nearby so you can drop in the crumbled up $1’s, $5’s, and the coins that jingle when you take a step.
It’s alright to use large bills, so long as you’re not spending the change you get back simply because it’s available.
You can even employ the use of an app like Paypal’s Acorns to help save those extra dollars.
3. Tidy Up Your Checking Account
One way to contribute to your emergency fund is to transfer any money left after paying off bills. If you don’t plan on using the money immediately, it’s in a safe place. Should an unforeseen doctor’s visit necessitate access to the funds, you know exactly where the money is.
4. Cut Expenses
This might be the most important point on the list. How much are you spending on things that you don’t actually need? Did you know that a combined monthly subscription to Netflix, Hulu, and Amazon is cheaper than the average DirecTV bill?
Instead of going out to eat, buy ingredients to cook at home and portion them for meals throughout a shift. You could save even more if you carpooled instead of driving the pick-up truck to work every day.
5. Get a Second Job
These days it’s quite common to run into people who work more than two jobs a week. While some may enjoy the extra cash in their pocket, not all of us can enjoy such a delight.
Getting a second job is a good way to gain peripheral income. Divide up the money for that check by 70% for utilities and bills, 20% for household necessities such as food and toiletries and toilet paper, with the other 10% going towards luxuries such as eating out or paying a Netflix subscription.
6. Save your tax refund
It’s always tempting to spend it when you see more than three numbers. If you want do not want to see the cash and tempt yourself, a request for direct deposit can always be made.
You can spend 10% from your second job for any ‘wants’ that arise.
7. Sell Some Stuff
This is one that hit close to home. My parents have in storage more than 40 boxes of household dishware, books, records, and movies that have all been gathering dust.
My mother had a great point when she said the stuff has been around too long.
If the things in your house or storage are as old as you are, it’s time to let go. Figure out what’s valuable, sell it and add that to your emergency fund as well.