words Al Woods
Bad luck comes to everyone, sooner or later. And when it does, you can expect to cough up some money. Medical, auto, or household emergencies usually come with big bills that have looming due dates.
A robust emergency fund can help you handle these emergencies without taking out a personal loan. But you probably already know the value of savings in your budget.
What’s harder to figure out is how you can create these savings so that you’re prepared for the next financial emergency. If your finances are still reeling from the last emergency, check out this guide to help you build out your savings.
How Much Should You Have Saved in This Fund?
Before you start redrafting your budget, it’s important to have a goal, and the more specific yours is, the better. Setting a specific benchmark will make it easier to visualize what you need to achieve your objective.
A standard rule of thumb is to save anywhere between three to six months’ worth of expenses. This savings goal gives you the best of both worlds.
- You can dip into when you need help repairing your car’s clutch or replacing your washing machine.
- It’s big enough to help soften the blow of bigger financial issues, like a pink slip or medical issue.
This is just a guideline, so feel free to tweak it to better suit your needs and lifestyle.
What Happens if It’s Not Enough?
Don’t panic if your emergency fund falls short of what you need. Take some time to investigate online installment loans to bridge the gap. When you’re first starting out, MoneyKey is a useful resource for information on installment loans and online direct lenders.
Taking the time to compare your options is always a good idea. It gives you a chance of finding the best rates available for your credit score.
How Do You Find More Savings?
Whether you just emptied out your fund to field one emergency, or you’re in the process of repaying an online installment loan, you’ll want to focus on saving. And saving is almost impossible without a budget. This spending plan can help you ensure you have enough cash to go around.
Here are some additional tips to help you with your budget.
Cut out Expenses
You only have so much cash to go around, so if you want to boost your savings, you’ll have to reduce what you spend in other areas of your budget. Comb your budget for any unnecessary spending, like upgrading phones when you don’t have to, parking or library fines, and relying on takeout.
Make it Automatic
You’ll hit your goal easier and faster when you contribute to your savings regularly. Once you have the cash to go toward your fund, set it so that it goes there automatically each month. This prevents you from accidentally spending the money you promised you would save.
Don’t Tap into It
Don’t think of your emergency fund as an extra checking account you can dip into now and again. The only time you should touch your emergency fund is when you need help paying for an unexpected emergency expense.
You Can Save More if You Try
Savings don’t appear out of thin air. They’re a slowly growing account that is the result of hard work over weeks, months, and even years. Remember this if you ever feel as though you aren’t saving fast enough. It takes everyone time to squirrel away savings, but not everyone has the patience or dedication to commit to these habits.