If your AC went out right this second, and you found out it would cost you $500 to fix it, would you be able for pay for it? For the vast majority of Americans, the answer is no.
What is it about saving up for an emergency fund that is so hard? In theory, it should make sense to all of us that because life is so unpredictable, we desperately need a lump sum of cash somewhere that can be easily accessible and used in a pinch. Yet, time and time again we encounter life’s little bumps and have to go into debt to move past them.
So, is there a simple way to build up an emergency fund without giving up your lifestyle? The answer is a resounding, yes!â Here are a few foolproof ways to do so:
1. Open Up a New Savings Account At A Different Bank
Even if you put money into your primary savings account, most of us do not have the discipline to keep it there throughout the months. So, sign up for an online account that automatically withdraws a certain amount each month. This can be as little as $5 or $10, an amount I recommend starting with because you barely miss it. As you get comfortable, slightly raise the amount so that you can save up faster.
2. Give Up One Small Thing And Set That Cash Aside
It would be too easy for me to tell you to cut out your gym membership or your coffee from a nice coffee shop every morning, but that’s too abrupt of a change. What I recommend is one small thing. Skip the coke at the vending machine and put that dollar in a different fold in your wallet and continue to move past small purchases like that until you get more comfortable going without.
3. Pass On The Upgrades
Perhaps you want a new car, a new phone, or a better TV. That’s not abnormal. Our world is full of advertisements that make us want upgrades. Push yourself to live with what you have. If you want a better TV but know the one you have works just fine, put the money you would have spent in an emergency fund and enjoy using what you already have.
4. Utilize Work Incentive Programs
Many jobs will let you withhold certain amounts from your paycheck. Take advantage of programs like this that help you save automatically. The name of the game is saving without even realizing you are doing so.
5. Save Double The Amount
If none of the above works for you, you can go through one of my favorite exercises: saving for something you actually do want while concurrently building up an emergency fund. For example, if you want to save $2,000 for a vacation before you go, force yourself to put one dollar in the emergency fund for every one dollar you put in the vacation fund. It will take you twice as long to save for the vacation, but when you actually get to go, not only is it paid for, but you’ve built up a nice savings in the process.
By using the tips above, you will be well on your way to establishing an emergency fund. It doesn’t have to be quick nor does it have to be a large amount right away. Just going through the exercise and developing good habits is all you need for a nice financial cushion in the future.
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Written by Catherine Alford
Catherine Alford is a freelance writer who currently lives in the Caribbean with her husband and spoiled pup, Julep. She received a B.A. from The College of William and Mary and an M.A. from Virginia Tech. When she is not writing for various personal finance websites, she enjoys sharing her frugal and fabulous adventures on her blog, BudgetBlonde.com.
Good ways of managing money
Hi Catherine! These are great ideas! I really like #5 because it isn’t something that I have thought to do before now. My sixteen year old daughter is already working toward an emergency fund now. I am so proud of her! Her goal is to get to $1,000.00 by the end of this year and she is more the 3/4ths of the way there. She does cleaning and odd jobs for her grandparents to earn extra money and usually puts at least 1/3rd of that money in her fund. When she has that squared away she will move on to one of her other savings goals. I am going to mention your ideas to her - thanks so much!
We all need to save for an emergency fund. It’s insurance for those unexpected events that happen to all of us. It leads to peace of mind is just the sensible and responsible thing to do.
Whats wrong with getting a part time job a couple evenings a week, or perhaps one day on the weekend for two or three months.