5 Easy Ways to Build an Emergency Fund
You know you should have some money put aside for emergencies, but you’re not quite sure how to make it happen. Maybe you’re already operating on a tight budget; maybe you’ve tried making savings a priority before and failed.
How do you manage to pay your monthly bills and still have enough left over to put aside for a rainy day? Here are five easy ways to build an emergency savings fund, whatever your current income.
1. Save First, Not as an Afterthought
The first trick to savings is not to wait and see how much you “have left over” at the end of the month, but rather to “pay yourself first.” At the beginning of the month (or each time you get paid), put aside a certain amount towards your emergency savings before you do anything else.
Once this money is safely in your savings account, you won’t be tempted to spend it on all the other things that tend to crop up.
2. Set It and Forget It
Take things one step further by automating your savings to reduce any likelihood for human error (or weakness). Set up an automatic transfer from your checking to your savings account at the beginning of each month (or each time you get a paycheck) so there’s no chance you’ll forget to put this money aside or use it for other things.
3. Stash Your Windfalls
Resist the urge to spend any extra money that comes in. If you get a rebate check, a tax refund or even $20 in a birthday card from your Great Aunt Patricia, stash it immediately in your emergency savings fund.
Since you weren’t counting on this money as part of your monthly budget, you’ll hardly miss it, and every little windfall will help get you closer to your savings goal.
4. Slash Your Budget
Free up extra money for savings by taking a red marker to your budget and trimming as much fat as possible.
Do you really need to pay for those 700 cable channels?
Do you really need to eat out 3 times a week? Every bit you can slash from your monthly budget gives you more cash you can put towards your emergency fund. Use these budgeting worksheets to find ways to save.
5. Let Your Money Grow
Make sure the money you’re saving is working for you by putting it into a high-yield savings account, money market account or CD where it can grow and give you even more money down the road. Every extra dollar counts, so make sure you’re getting the maximum return for your investment.