Saving money is a challenge that every American is now facing. Even $500 in a bank account can do a lot in an emergency situation. With $500 you can buy groceries, pay an electric bill, repair your car, or fend off many other evils associated with emergency situations. After committing yourself to building an emergency nest egg, take the time to build a budget. In your budget make sure to add a line called “pay myself” and that can be the monthly amount you allot to your emergency fund savings strategy.
When reviewing your budget, if you find places to reduce your spending, take action to do so! For example, if you know removing the premium movie channels from your cable service can save you $15 a month, take that amount and put it into a savings account. By doing that faithfully, the amount will build and help contribute to the cushion the emergency fund can provide you.
Automatic transfers are also a great time saver when it comes to building an emergency fund. If you get your paycheck deposited every other Friday, set up an automatic payment plan to move $25 from each check directly into your savings account. Although that amount may sound like a pittance, with 26 checks a year you can save $650.
Designating a separate account specifically for emergency savings will prevent you from accidentally spending the money on something else. Make sure that money is transferred into an interest bearing savings account so it too earns interest for your emergency fund.
Ultimately, your goal should be to bank between 3-6 months worth of salary to cover your living expenses, if you are unable to bring in income for that period of time. It may take a bit of sacrifice over a long period of time to reach that goal, but once you do you will feel great about having an emergency savings fund.
The road of life is filled with many bumps that may cause you to swerve off track. Building an emergency fund is one way to ensure that when negative scenarios like a job loss, house fire, or car collision occurs you will have the resources to tap into to help get you back on your feet. Some people may think that if a bad situation occurs they can just rely on their credit card to get them out of a pinch. However, some situations require cash and by using a credit card you risk taking on bad debt; which will make an already challenging time increasingly difficult.