Most experts recommend having at least 6 months worth of income in an emergency fund. That may seem impossible when you're just starting out. While it's important to have a goal in mind, you need to be realistic about how much you can put away especially at the start.
Starting Your Emergency Fund
Before you begin trying to save money, you need to figure out where all of your money is going. Even if you think you know, you should track your expenses for at least a week. This will allow you to determine if there's anything that you can reduce or cut out completely.
Once you know where your money is going, you can begin to save. To get started, follow these tips, put together by Auto Credit Express:
- Determine where to put the money.
You want to make sure that the money is easily accessible in an emergency, but in a place that isn’t intended for everyday use. A savings account that is not connected to your checking account or debit card is a good idea.
- Reduce spending.
Something as simple as cutting back on the number of times you visit the coffee shop each week, or getting rid of premium cable channels can help save money.
- Pay yourself first.
Make a payment to your savings stockpile at the beginning of each month. If you treat it like a bill, you will always pay it on time.
- Save your tax refund.
If you get a tax refund every year, immediately deposit the check into your rainy day reserve. Better yet, have it electronically transferred, so that you never have your hands on it.
- Get a second job or work overtime.
If money is really tight, and you can't afford to cut out anything, getting a second job or working overtime can help. Just be sure to put all of the extra money into your disaster depository.
- Use it for emergencies only.
Your monthly car insurance or property taxes do not count as emergencies. You should be planning ahead for those, so that you don't have to touch your emergency stash.
- Put spare change in a piggy bank.
Although you won't save huge sums of cash this way, every little bit helps.
As We See It
As you can see, saving money doesn't have to be difficult. We hope these tips help you create a sufficient emergency fund.