If there’s something that we have learned in the past two years since the surge of covid-19 is if we had an emergency fund, it would have helped many of us. Due to the pandemic, many people worldwide lost their job, causing a negative snowball effect on their finances.
It was not easy for those who don’t have any money saved for emergencies like this one. So how can we overcome these kinds of situations?
The answer is straightforward, how to set up an emergency fund that will help you in these times of crisis.
How To Set Up Emergency Fund
An emergency fund is a vital part of living a financially sustainable life. It is important to have an emergency fund so you have the funds necessary to cover unexpected costs, whether it be medical, car breakdowns, or home repairs. To begin, make sure you have a clear idea of what you want for your emergency fund. It should be specific and detailed and should allow room for any contingencies that may come up in the future.
What is an Emergency Fund?
In simple words, an emergency fund is an amount of money that someone saved in a secure place like a “saving account” that they can use as an emergency in times of financial crisis.
It can be an illness, unexpected home repairs, loss of a job, or any situation when you need some money quickly.
Setting up an emergency fund will also protect you from taking a loan or using your credit card for unexpected expenses.
Create a separate account for saving
Some years ago, I decided to open up a new savings account to put 10% of my monthly income. I did this because I was always tempted to spend more money when I see that I have money available in my current account.
By creating another account helps me accumulate funds. I make it a must to put the same amount of money each month and try not to withdraw any penny unless it’s an emergency.
This account has allowed me to save money each month and helps me overcome any unforeseen circumstances.
Start with smaller contributions.
If you want an emergency fund, you have to start saving even if you are low money. To make it easy, define a small amount you can afford to save every month and stick to it.
To make this happen, try to look for and cut unnecessary expenses, like buying new pair of shoes every month, going to the restaurant, or buying coffee.
By doing this, you will not be stressed as it will not have a small impact on your essential daily routine. You can live without these things for some time. This will help you to start and increase your emergency fund.
Try to make this become a habit, not a struggle. Your life should not become miserable too by cutting everything that you love doing!
Find ways to boost your income.
Many of us have a 9-5 job, and our salary is still not enough for all our expenses. So we ofter ask ourselves, “how can I boost up my income?” or “How can I start a side hustle?”
The answer is simple. On the Internet!
By searching the net, you will find many opportunities that can help you. For me, I love writing! I started this blog with $50, which allows me to create a side income each and every month.
There are many other ways. Start your own youtube channel. Do you like to bake cakes? Create a website or sell your cakes online. Do you love crafty things? Create your own crafts and sell them online via Facebook, eBay, or Amazon.
There are many other ways, so go to Google and start your research!
Check your budget regularly.
Monthly budgeting is essential if you want control over your finances. It allows you to know exactly how much can you can spend according to your financial situation.
Checking and analyzing your budget regularly will help you save a little more on your expenses by identifying and cutting some nonessential expenses. For instance, suppose you usually spend one hundred dollars on groceries. In that case, you can cut some nonessential goods and save twenty dollars from this.
You can also try to save a little more on each item that you spent your money on. Like clothing, kitchen equipment, car repairs, etc.. in the end, you will have enough to put it in your emergency fund.
You can make an automatic deposit in your emergency account.
If you do not touch the money, you will not spend it! So why not schedule an automatic transfer through online banking. Treat this as if you are paying a bill every month.
Thinking like this made me accumulate a nice amount of emergency funds.
You can schedule a fixed amount to be automatically debited from your account to your savings fund each month.
By doing so, I reached my goal faster. Because before, whenever I had this money in my hands, I was more tempted to use it than save it.
The key to creating a sufficient amount for your emergency fund is to pay yourself first.
Don’t wait till it’s too late. Start Saving Now.
It’s better to start saving now because we don’t know what tomorrow reserve us. An emergency fund can make a significant difference if you are going through financial difficulties.
If your need an unexpected car repair or lose your job, you can continue to live on your saving fund for some time rather than being totally broke. I would save you from borrowing from friends, accumulated credit cards debt, or even being forced to take a loan.
Instead of creating another debt, you can use your emergency fund to pay your bill.
Don’t let you be intimidated by the amount that you have. Whether big or small. What is important is that you have something that you can rely on in difficult times.
Just think of this. Rather than having nothing, even the tiniest amount of money can be a lifesaver when you have unexpected and negative changes in your finances.
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