We all know that we need to save money. But for some reason the vast majority of Americans fail to do so. They get caught up in the consumerist lifestyle, thinking that they need more and more, and they neglect to realize that they already have plenty. If tragedy hits, such as they lose their job, have a huge unexpected expense, or some other financial disaster, they will be struggling. If you want to keep your financial health sound, you need an emergency fund.
How to Build Your Emergency Fund
The easiest way is to start small. You can go to your bank and open a free savings account, or you can open an online savings account and link it right to your checking account. Now dont think that you are going to make tons of money off the interest in these accounts. You will likely only make about 1% at the most (if you open an account with your existing bank your can hope for around .1% to .25%). The interest earned isnt the point; the point is that you want money that is easy to access.
Just about everyone, no matter what their bills are, could afford to set aside $25 per month. All that takes is skipping eating out once per month, setting aside a night at the bars, cutting the cable, or turning down the thermostat a little. Reducing your expenses by $25 each month should not be hard to do.
Schedule your savings to automatically go from your checking to your savings account a couple of days after your paycheck is deposited. This automatic deposit will make things a whole lot easier since you will never have to worry about it. You wont have to think, it will just happen.
Earn More Money
Now saving $25 is a start, but that will only get you $300 per year. If you have some major auto problems, your emergency fund will be wiped out immediately. The trick to having a healthy financial foundation is to increase your savings a little bit each month. To do that, you may have to start earning money on the side.
Earning money on the side is easy. In fact, if you write for Seekyt, then you are probably doing so already (at least trying to do so). To earn some extra money just look at things that people hate to do themselves, and then do them for them. This could be cleaning houses, mowing lawns, raking leaves, babysitting, or washing cars. They may seem like things that teens do to make spending money, but they are great sources of income. Another way is to look at what talents you have, and then sell those talents. If you are good with design, then freelance graphic designing. In fact, there are tons of things people will pay for in this realm. Interior decorating, fashion, cooking or meal planning, writing, and more are all great options.
Another way to really boost your savings is to set aside those windfalls. Every year you likely get a tax refund. Put that into your emergency fund. If you have an inheritance, or a legal settlement, that can go into your savings.
There is no set amount on how much your emergency fund should be. Some financial professionals say it should be 6 months living expenses, others say 2 months, and some say 2 years. But really, your emergency fund should be enough so that you can sleep comfortably at night. Enough so you know if you lose your job, have major car problems, need computer repairs, or big hospital bills, you wont be bankrupt trying to pay for them.
Do you have an emergency fund? What is holding you back?