While having a set budget is a great way to manage your finances responsibly, it’s not uncommon for unexpected expenses to pop up now and then. Home repairs, emergency room visits, and even the loss of a job are events that people experience daily. To best combat the financial trouble these events can bring, consider setting up an emergency fund, separate from your regular savings, that you can regularly contribute to and dip into when you need extra financial assistance. Here are a few key tips for building a substantial emergency fund.
Look Into Your Current Accounts
Take a look at your current accounts and see what your regular expenses are looking like. Do you have expenses that cost you more than they should? Is there extra money leftover in your checking account after your monthly bills are paid? These questions can help you gauge the amount you can contribute to your emergency fund on top of your regular expenses every month.
Set a Monthly Contribution Goal
A great way to begin building your emergency fund is setting a monthly contribution goal that you can comfortably stick to. After taking a look at your current accounts and expenses, you can decide on a set amount to contribute each month. A monthly goal will help you make a habit of saving money with each paycheck. To make a habit of saving even easier for you, set up an automatic transfer into your emergency fund.
Minimize Splurging on Extras
Everyone deserves to splurge now and then. However, if you’re a consistent spender, and notice a lot of your expenses are extras that aren’t necessarily a necessity, consider cutting back. Splurging on extras, even if they’re small can add up quickly. Things like eating out or ordering in, picking up coffee every day, or frequent online shopping are common ways that a lot of people tend to spend extra money. When you make an effort to cut back on these things, you will notice how quickly the extra cash can add up. Use the excess to increase your contributions to the emergency fund.
Christopher Jacob is a Registered Representative with Saxony Securities, Inc.. Securities offered through Saxony Securities Inc. (SSI). Member FINRA, SIPC. Non-security products and services or tax services are not offered through SSI. Cadeau is not affiliated with SSI.