Here’s the deal: you could lose your job at any time, you may get sick, your car could die out on you, or you may have to deal with an expensive home repair, at any time, and without warning. Would you be able to deal with any of these issues if they happened to you in the middle of the month or now?
While we are advised to make the most out of every day, and you may have joined the you-only-live-once movement, saving for a rainy day or days is crucial. Billionaires save for rainy days even though they own all the skyscrapers around yet; they have emergency funds. And that means that you do not have a legitimate reason not to care about emergencies and how to deal with.
Now, I know what you are thinking – you know that emergency funds are critical but putting money and keeping money in the account is tough – right? Well, we are here to help you out but, you need to keep in mind that the emergency fund is not money for personal desires or wants, dinners or new cars. This piece will help you save money into your emergency fund. Keep reading.
Be honest with yourself
You need to look at your lifestyle and look at the things you could do differently. If credit cards are making it hard for you to save, lay them off. You need to save money out of your income without going into debt so, review your bills and see where to cut back. You have to be deliberate with that amount and always bump up your savings by that amount. The other way to go about this is by saving your spare change. Start by gathering all dollar bills and 5-dollar bills. At the end of the year or 5, you will be surprised by your savings. You also need to kick your bad habits like smoking and drinking.
Choose a savings tool
Money market mutual funds, no-fee savings accounts, and Roth IRA are the best places for you to put money for emergencies. Roth IRA allows you to take out money at any time and you will not be penalized, you won’t lose any money in the savings account, and a government-backed mutual fund is safe for your money. So, if you need a safe place and way of saving for the rainy days, you must consider these options.
Find and bank on the extra source of income
You may be tempted to treat yourself for receiving a raise but doing that keeps your emergency fund dry. As hard as it may be, always out the extra money in your savings account. This also applies if you just finished paying off your student loan or your car loan. Direct that money to your savings account because you were used to living without the extra cash. Do the same for your tax refunds.
Put money in separate accounts
The main reason why most people have a difficult time saving for emergencies if because they deposit money into one account. For the emergency fund to grow, you must put that money in a separate account, say a fixed deposit or savings only account. You won’t be tempted to use the money, and it will grow steadily. You can get the best results by automating your transactions. This will also work well if you have to make spousal support payments.
Other strategies
- Resell what you don’t use
- Write down your goals
- Save the coupon money
- Make coffee at home and carry lunch
- Take advantage of interest-earning accounts
Protect your money from inflation
