Every household in America should have an emergency fund, or a fund of money that is reserved for unexpected expenses or unforeseen circumstances. Whether you lose a source of household income or have to pay an unexpected medical bill from a clinic like ThriveMD, having an emergency fund set aside is the key to making it through unforeseen situations without severe negative consequences for your finances.
Starting an emergency fund can be difficult – here are a few tips to make it easier.
Track Your Spending
In order to find ways to save money, you should track your spending to determine where your money is going currently. Try creating a spreadsheet on your own or with the help of a budgeting app or service to get a good idea of how much money you are spending each month, and what you are spending it on. From there, be realistic about the areas in which you could afford to cut down on your spending, and save as much as possible.
Direct Deposit Money Into Savings
Set up a direct deposit with your bank so that an allotted amount of money each paycheck is going directly into your emergency fund. This will take the guesswork out of determining how much money to set aside, and will ensure that you are putting money into your fund every single time you get paid. Some households open a separate bank account that is used solely for the purpose of saving money for emergencies, so that the funds cannot otherwise cannot be used.
Save Unexpected Income
Should you be lucky enough to earn an unexpected amount of income such as a large tax refund, bonus, gift, etc., always be sure to put the money into your emergency fund. This will allow you to build your fund considerably without cutting down on any additional expenses from your usual monthly income.
Set A Goal
Once you have started your emergency fund, determine a realistic savings goal based on your income, the amount of money you are putting into your fund each month, and the reasons for which you are saving money. Once you reach this goal, you should continue saving – but you could potentially put slightly less money aside every single month, as you will have more wiggle room financially and can rest easier knowing that you have a sufficient emergency fund in place.