Life sometimes goes in ways we least expected; that is why we always have to save for the rainy days. Setting up an emergency savings fund will help you if you want to live a healthy financial life. Job loss or unexpected illness could lead to financial distress if we do not prepare well ahead of time.
Saving money is not a simple task. It requires discipline. The easiest way to achieve this is by rethinking the approach. Instead of concentrating on the things you are going to miss, look on the brighter side, as you will be preparing yourself for the unexpected. With that said, let us look at some of the ways to build an emergency savings fund.
Establish Automatic Savings
If you have trouble saving, set aside a portion of your paycheck that will automatically be transferred to your savings as soon as your salary gets in. You can also open an online savings account, which you can easily access. This will reduce the urge to withdraw money unnecessarily.
With time, your automatic deposits and interest that has compounded will add up. You will be surprised how easy it is to cover unexpected expenses without having to put the burden on your credit card or take up a loan.
Have Small Savings Goals
Financial advisors usually recommend saving 10% to 15% of your income. They also recommend having about six to 12 months of your expenses in reserve. However, this might not be possible every month. Save small, because even that $20 saved each week can make a whole lot of difference. This puts you in the savings habit, and it only gets better once your financial situation improves.
Avoid setting unrealistic goals. This will only discourage you once you do not hit your target. Start slowly as you progress. We live in a society where we only celebrate big achievers. We forget the guy next door who grows his food and bikes to work, forgetting that this is the sort of life that leads to real wealth.
Set Up a Savings Club
Like they say, “there is power in numbers.” When you get together with your girls or family and work towards a specific goal, the sky is not even the limit. Make sure you create a group with like-minded people. Meet once a month, and review your savings goals. When someone hits a target, celebrate them. You can make use of apps such as Qapital. This app allows all group members to check and track their shared goals.
Cut Your Expenses
Another way to build an emergency savings fund is by cutting down on your unnecessary expenses. For instance, if you usually do your hair or manicure every week, cut it back to every other week or eliminate this part of your lifestyle altogether. Better still, do it yourself. Make sure you keep the money you will have saved in your emergency fund.
Lastly, check your shopping habits. If you are fond of shopping name-brand items, consider switching to generic items. You will realize that all these goods taste almost the same. Also consider buying in bulk. It helps you save a lot.
Everyone needs to have an emergency savings fund. This way, you are saving for the unexpected. Having some money saved will help take you through a short-term financial difficulty, as opposed to sinking deep into debt.