Career Advice

Tips for Starting an Emergency Fund

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An emergency fund is an important investment. Having one allows you to set aside cash for unexpected situations. An injury at work, a death in the family, or getting laid off are just some of the situations you may need to prepare for financially. Without an emergency fund, an unexpected scenario can damage your financial future

It’s good to be optimistic, but life is full of uncertainties. It matters a lot to know how to keep yourself afloat regardless of the challenges that lie ahead. Here’s how you can get started building an emergency fund for yourself. 

Here are some tips on managing your finances that will help you to prepare for such expenses.

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Know how much to set aside

There is no standard as to how much cash you should put in an emergency fund, but it would be wise to follow the three-month principle. You should be able to save enough cash to cover your salary for at least three months. The amount will vary depending on whether you are employed with full benefits. 

In case you are working part-time or as a freelancer, your emergency fund should be good enough to cover rent, utilities, food, and other household expenses for three months. In any case, you need to commit to a budget that reserves a certain amount for unexpected expenses

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05/19/2024 07:31 pm GMT

Make lifestyle adjustments

How much do you spend on leisure and luxuries? Given the current financial climate, prioritizing essential expenses may be wise before indulging in extras.

Begin by evaluating your financial status to identify unnecessary costs. Do you have streaming or subscription services that are no longer useful? What is your monthly expenditure on food deliveries?

It’s not about giving up simple pleasures; it’s about recognizing that even small lifestyle adjustments can contribute significantly to your emergency fund. Start by cataloging all your monthly expenses and identify items you can eliminate or reduce. This disciplined approach will gradually help you save enough to build a robust emergency fund.

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Get a part-time job or a side hustle

Securing a part-time job or starting a side hustle can significantly boost your income and provide financial breathing room. These additional earnings can help meet unexpected expenses, save for future goals, or invest in personal development. When choosing a side hustle, consider your skills, passions, and the time you can commit. Options range from freelance graphic design and writing to driving for a ride-share service or tutoring online.

The gig economy offers flexibility and variety, making it easier to find something that aligns with your lifestyle and career goals. Platforms like Upwork, Etsy, or Airbnb provide avenues to monetize different skills and assets. Remember, the key to success in any side hustle is consistency and dedication. Start small, scale your efforts, and integrate your new income streams into your broader financial plan to maximize their impact.

Dive into savings with these top tips for starting your emergency fund! From assessing your spending habits to simple adjustments, learn how to build a safety net that keeps you secure. #EmergencyFund #FinancialFreedom #SavingsTipsClick To Tweet

Other savings ideas

Exploring various savings ideas can significantly enhance your financial stability. Consider automating your savings to ensure you consistently set aside a portion of your income. Look into high-interest savings accounts or certificates of deposit for better yield on your stored funds.

Additionally, reviewing monthly subscriptions and cutting unnecessary spending can free up more money to save. By regularly evaluating and adjusting your budget, you can maximize your savings potential and work towards your financial goals.

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05/19/2024 10:52 am GMT

Use budgeting apps

Building an emergency fund is often easier said than done. It’s easy to forget about setting aside money for the fund, and committing to a savings strategy requires monitoring your finances in real-time.

If you find it challenging to track every cent, consider using a personal finance app.  These apps help you calculate how much you need to set aside for an emergency fund and can gamify your finances to make saving more engaging. For example, Long Game encourages setting financial goals and rewards you with cash for achieving milestones.

For those who prefer a more stringent approach to building emergency savings, apps that automatically transfer a predetermined amount from your main bank account to an emergency fund can be extremely useful.  Use tools to ensure that a portion of your funds is consistently allocated to your emergency reserves, simplifying the saving process.

Set up a dedicated savings account

Your emergency fund should be off-limits unless absolutely necessary. To ensure this, separate it from the funds you use for daily expenses by creating a dedicated savings account specifically for emergencies. Choose a bank that offers low or no fees to maximize your savings.

When selecting a bank, compare the terms of basic savings accounts. Once you’ve established your emergency fund, make it less accessible to avoid the temptation of unnecessary withdrawals. Consider opting out of having a debit card for this account. If you need to use funds from your emergency fund, doing so over the counter will be less convenient but will help keep your spending impulses in check.

The future is unpredictable, making it crucial to prepare for any eventuality. By adopting healthy financial habits now, you can safeguard yourself against potential financial crises caused by illness, injury, or economic downturns.

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05/19/2024 04:42 pm GMT

Other Resources

  1. Budgeting 101: From Getting Out of Debt and Tracking Expenses
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    05/19/2024 04:33 pm GMT
  2. The Power of Broke
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    Drawing his own experiences as an entrepreneur and branding consultant, peeks behind-the scenes from the set of Shark Tank, and stories of dozens of other entrepreneurs who have hustled their way to wealth, John shows how we can all leverage the power of broke to phenomenal success.a

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    05/19/2024 04:42 pm GMT
  3. You Need a Budget
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    Experience a life free of financial stress and transform your relationship to money with this indispensable guide—the first book based on You Need A Budget’s proven method that has helped hundreds of thousands of people break the paycheck to paycheck cycle, get out of debt, and live the life they want to live.

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    05/19/2024 06:56 pm GMT
  4. Personal Finance QuickStart Guide
    $24.99 $22.49

    The Simplified Beginner’s Guide to Eliminating Financial Stress, Building Wealth, and Achieving Financial Freedom (QuickStart Guides™ - Finance)

    View on Amazon.com View on Walmart.com

    We earn a commission if you click this link and make a purchase at no additional cost to you.

    05/19/2024 04:42 pm GMT
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