Emergency funds are one of the best strategies for living a healthy financial life. The least of its advantages is saving up enough cash to cover your essential expenses for the next six to nine months. However, meeting up with its commitment can be quite challenging because of the endless urgent need for money. This article explains the seven best ways to build your emergency fund without stress. Read through to understand.
What Is An Emergency Fund?
An emergency fund is a cash you set aside to take care of unforeseen contingencies. You build it over time and consider it a last resort in financial crises. You can use it to solve health bills, debts, business failures, job loss, major urgent repairs, etc. An emergency fund helps you to stay off selling your properties or applying for loans to solve problems.
The Smart Ways To Build An Emergency Fund
1. Set An Emergency Fund Goal
Setting an emergency fund goal is one of the best ways to build your emergency funds. Since emergency funds are mostly set for unforeseen contingencies, you can set a specific amount to save over a while. For instance, you can set a goal of $20 monthly or $70 every three months.
Sometimes, you can set emergency fund goals to solve problems at predicted periods. In cases like this, your goal is calculated based on time. For instance, if you are setting up an emergency fund to be used in 12 months, you can get your goal by multiplying your essential monthly expenditures by 12.
2. Save Unplanned Cash
Do not streamline your savings to your fixed or passive income. If you really want to build your emergency fund, save every spare and unexpected cash you receive. This list spans from bonuses to tax refunds, won bets, inheritances, cash gifts, etc. Do not streamline your savings to your fixed or passive income.
3. Save Automatically
Sometimes, saving manually can be difficult due to personal needs and responsibilities, indiscipline, debts, etc. Such conditions often hinder emergency fund growth. However, you can overcome this when you automatically save your money. It is as easy as having a part of your income directly sent to your emergency saving account. It works!
4. Do Not Raise Your Monthly Expenses
Meeting your emergency fund goals does not give you leverage to spend more than usual. Overspending is not a smart way to build your emergency fund. You can still enjoy life without spending beyond your limit. Also, do not consider opening a new credit card, as this can hamper your account growth and affect your financial stability.
5. Met Your Goals? Keep Saving
Although sometimes, emergency funds are created for specific (predicted) periods, anything can happen unpredicted and require you to lean on your emergency fund. You could get bottle-necked if you have little or nothing to take from your emergency fund. This is why you should not relax after you have met your saving goal. Saving should be a habit, more than a sustenance strategy.
6. Set A Self-Rewarding Strategy
The self-rewarding strategy is one of the creative ways to build an emergency fund. Everyone likes luxury and rewards. This strategy involves rewarding yourself whenever you meet your emergency fund saving goals. It could be monthly, bi-monthly, etc., depending on your income, saving structure, and preference. This strategy motivates and spurs you to remain faithful to your goal.
7. Get An Accountability Partner
You can hardly go wrong when you include working with an accountability partner in your saving technique. An accountability partner helps you stay responsible and ensures that you do not miss out on your saving goals. You can set up fines for when you default to help you stay disciplined.
Finally!
Building an emergency fund can be pretty challenging, as daily needs and other factors often come into play. However, the strategies explained in this article can help you grow your emergency fund seamlessly. Adopt them and enjoy a healthy financial life.