Life can be unknown sometimes, especially when it comes to our economy. You can wake up in the middle of the night to a flood from a pipe bursting in your home, and suddenly you're on the hook for costly cleanup and repair. Or you may be injured and rack up costly medical bills, or go to work one day and discover that you're being laid off without your own fault.
Any of these can hurt us financially and without money in a bank, you can have no choice but to drive up expensive credit card debt to handle them. Therefore, emergency savings are crucial, but only 38% of Americans have actually built up an emergency fund, according to Schwabs 2019 Modern Wealth Survey.
If you are without a spare, you should know that you can have serious long-term consequences next time an unplanned bill comes up. Having to pay expenses on a credit card and paying this balance off over time means a lot of interest. It also means potentially damaging credit, making it more difficult to borrow when you need it.
A better bet? Create a real emergency fund with enough to cover at least three months of significant living costs (and ideally more than six months). That's how it is.
1. Choose some spending to cut
If you currently spend the entire paycheck month after month, make some changes to build savings. Look at your budget (or create one if you don't follow one yet), see where your money goes, and identify some expenses you're willing to trim.
The specifications are up to you. Also, if you don't want to give up daily comforts such as coffee, takeout meals and rideshares, then maybe scaled down to a smaller condo with lower rent. Or you can cancel your cable package, give up a training membership, and take a staycation instead of the regular annual overseas hunt. It doesn't matter where you cut corners as long as you make a reasonable effort to save.
2. Get a New Job
Sometimes cutting expenses will only get you so far in saving money, especially if you have a fairly modest lifestyle and spend most of your money on basic reasons. If so, another job may be your ticket to a solid emergency fund.
And you don't have to sign up for a boring concert, like attaching calls to a call center or entering data every night. Instead, try to find a page job that spans you or that you know you want to do. You can design websites, photograph events, sell homemade crafts, or take care of others' pets. You have many choices to make meaningful work on the page and cushion your bank account in the process.
3. Banking Any Extra Money You Enter
It is not uncommon to enter some extra money during the year, whether it is a bonus on the job, a tax deduction or a generous gift or inheritance. If you are without a spare, the bank will really help the money jump on your savings, and when your bank begins to look more robust, it can serve as a motivation to continue pushing for your savings target.
An emergency fund may not be something you can build overnight, but it should be your best financial priority. A healthy level of savings will give you confidence in the light of life's insecurity; It's worth some victims to get there.