Prepare to weather the storms of life
Easy Ways to Build an Emergency Fund
by Chantal King
How Much of an Emergency Fund Do I Need?
6 Squirrely Ways to Save
How am I supposed to create an emergency fund when there's no money left at the end of the month? Have you ever asked yourself this question? Saving money can be a challenge no matter how much money you make. There will always be one more unexpected bill, one more item to buy, or one more payment to make. Yet, creating a cushion, or an emergency fund, is one of the smartest financial gifts you can give yourself. Here are some tips to get you started.
- Change your mindset. Don't think of saving as deprivation; instead, consider it preparation for life's ups and downs.
- Pay yourself first. If you wait until everything else is paid, you will come up short on savings. Set aside a portion of your paycheck each month. Try for 10%, but even a little adds up over the long haul.
- Set up an automatic deposit into a special account, before you even get your paycheck. Out of sight means out of mind. You probably won't even miss it.
- Aggressively tackle your debt. Add extra money to the minimum payments until the balances are all paid off. No debt means peace of mind and more money to work with.
- Once the debt is gone, keep making those payments to your emergency fund.
- Curb spending by enforcing a 24-hour waiting period. Even going out to your vehicle in the parking lot and asking yourself if the item is a need or a want can cut down on your impulse buys.
- Leave your credit cards at home. Studies have shown that plastic is much easier to spend than actual cash. So if you shop with cash only, you will not go over budget. Once the money is gone, it is time to head home.
- Throw some fun and entertainment into the budget. Even if it is only a $2 movie rental, you have to allow yourself some fun. Turning saving into a chore will only backfire.
- Where you keep your emergency fund is as important as building it. Set up a special account, perhaps even at a different bank. Making the money harder to withdraw will help you think twice about what an actual emergency is.
- Set mini goals and reward yourself when you reach them. It is much easier to work toward a goal than the vague notion of "saving more money." When you reward yourself, your determination grows to reach the next goal.
- Remove temptation. Quit going to the Mall just to browse. Don't look at the sales ads if you can't pass up a bargain, even if it is something you don't need. Don't go new car shopping if you know you can't afford another payment.
- Once your emergency fund starts growing, treat it like a friend. You know it will be there for you if you need it. Don't overuse it or treat it carelessly.
- Enjoy compounding interest. Look for a savings plan that gives you interest and the higher the better. Your fund will grow that much faster.
Creating an emergency fund is possible at any income level. As the fund grows, your peace of mind will, also. We all know that emergencies do happen, and being prepared for it can make all the difference between weathering the storm and being overwhelmed. If you don't have an emergency fund yet, today is the day to begin building one.
Take the Next Step:
- Are you getting the best CD rate? Use our simple CD tool to find out. It's completely private, easy to use and you'll know what rate is available to you in seconds!
- Get the interest your deserve! Compare money market rates with our best rate finder. It only takes a minute and your privacy is completely protected.
- For more on creating an emergency fund, please visit The Dollar Stretcher Library.
Discuss "Starting an Emergency Fund" in The Dollar Stretcher Community
Share your thoughts about this article with the editor.
More Tips & Tools to Help You
Live Better...For Less
- How to become a millionaire in 7 easy (hah!) steps
- 5 poor ways to save (and how to do better)
- 10 places to look for $500 in savings
Here are 10 ways to save $500 for when you drive, eat or travel.
- 9 savvy strategies to save for a rainy-day fund
- 5 big bills you can cut fast
- Money-saving secrets of the rich and frugal
- 4 ways to help your parents with their finances
- The dangers of convenience checks
- How to save big bucks on a college education
- Avoiding the pressure of peer spending
- The do's and don'ts of establishing credit
- 7 habits of highly frugal people
- Reduce your debt with this free debt course by The Dollar Stretcher
- Reduce your debt payoff time
- Find a better credit card rate
- Get better savings & MMA rates