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Do you have an emergency fund? If not, you should learn how to build an emergency fund ASAP in case something major happens and you need extra cash FAST!
Life is unpredictable and there are a multitude of things that can happen where you need access to extra money.
For instance, your car can break down, you could get laid off, have an unexpected medical bill, or have to catch a flight out of town to attend to a family emergency (this happened to me and the extra cash saved my butt).
The last thing you want to do when an emergency happens is max out credit cards or tap into your retirement account. Knowing that you have the extra money saved for emergencies will give you peace of mind and a bit of security.
Once you initially set aside reserves for an emergency fund, then it will be time for you to start focusing on saving 1 month of your monthly expenses. After that, start saving 3 months, 6 months, and finally 1 year’s salary.
I myself want to learn more about budgeting and saving, and that’s why I’m watching a slew of online courses about personal finance. If you are determined to save for an emergency fund and get your money in order, then I highly recommend taking advantage of 2 free months of online courses to learn more about personal finance as well.
OK…let’s get started and get that initial emergency fund established!
Tip 1: Save at Least $1000
You may be asking, “how much do I need for an emergency fund?”
According to Radio Host and businessman Dave Ramsey, he advises that people save up at least $1000 in their emergency fund. If I may, I would also like to add be sure you have quick and easy access to that money.
One of the easiest ways how to build an emergency fund is to start something like a 52-week money challenge. Ideally though, you’ll want to save up $1000 in your emergency fund a lot quicker than that, preferably within 3-6 months.
Then again, if it does take you a year to save up $1000, that’s totally fine because quite frankly, you would be doing better than most people.
I personally like to keep my emergency fund safely locked away in a fire and water proof safety box. I live in CA near the mountain and as you know, forest fires are a constant occurrence during the summer months. Not to mention, the earthquakes and occasional flooding.
Therefore, it’s important for me to have major documents like my US passport and birth certificate, along with cash, in a safety box that can withstand fire and water damage, and I can get to quickly.
Tip 2: Do a Monthly Budget
If you are serious about preserving your money, then you will want to do a monthly budget.
I am not a fan of monthly budgets myself and can certainly improve, but I have one so I can track how much money is coming in and how much money is going out. Plus, with a monthly budget, you can quickly catch where you are unnecessarily spending your money.
Money…that can be used towards your goal on how to build an emergency fund.
Remember, the name of the game is to save for an emergency fund as quickly as possible.
Hence, if you think you don’t have the extra money to save $1000, especially in under a year, the money leaks will soon be discovered if you do a monthly budget.
Tip 3: Get a Financial Planner or Financial Adviser
I went to see a financial advisor and I’m glad I did because WOW…there really is a lot that goes into preparing for one’s financial security and future!
Truth be told, I have not always been that good with money to where at one point in my life, I had to declare bankruptcy.
Although it has since fallen off my credit report, I still remember the embarrassment I felt and the jobs, apartments, and credit I was denied as a result of having a bankruptcy.
Oh…and the VERY LONG 10 years that bankruptcy had to stay on my credit report.
You would think after all that, I would be great with money, right? Not exactly. I still was making a lot of money mistakes and didn’t have so much as $100 in savings.
It was only after my father passed away in 2018 and the awful fiasco surrounding his will thereafter, that I realized I needed to get really serious about my money. And so, my twin sister and I immediately went to see a financial advisor and we are now on our way to building financial security.
You may not feel you need a financial advisor or planner right now because you lack the funds necessary for those services, but once you achieve your financial goals of saving for an emergency fund and then 3, 6, and 12 months of living expenses, you will.
Tip 4: Get a Second Job
If you need extra income to help save for an emergency fund, a second job could help do the trick, even if it’s just temporary.
This is where the holidays come in handy because so many businesses are hiring for seasonal help. On the other hand, when it’s not the holidays, finding a second job to work around your current job can be tricky.
Still, there are many side hustles you can do like Uber, dog walking, babysitting, photography, virtual assistance, graphic design, or party planning to name a few to help get you started.
If anything, have a garage sale!
Before I moved out of my last place, I decided to have a garage sale with my twin sister. It went GREAT! We both made over $600 each from the stuff we sold in one weekend.
That’s definitely one quick way how to build an emergency fund!
So, if you are unable to get a second job due to time constrains or you are unable to find one, have a garage sale. At the very least, sell items you no longer need or use on eBay and/or Craigslist.
Lastly, if you get paid weekly or bi-weekly, there is an extra paycheck every three months due to the additional week in a month. Before you get a chance to spend it, automatically take that extra money and add it to your emergency fund.
Tip 5: Make Saving for an Emergency Fund Priority #1
Again, you want to save that $1000 super-fast and so, if you make it a priority to learn how to build an emergency fund and commit to doing it, you will get it done in no time.
Consequently, every time you get money, whether it’s from your job, cash gifts, scratch-off winnings, tax refund, leftover change, whatever, put that extra money into your emergency fund and check this financial goal off your list.
Then when you reach your goal, don’t stop there! Continue to save for an emergency fund until you save one year’s salary.
Once I read an article that said saving one year’s salary could take years, which totally made me feel more at ease because look…saving $40,000, $60,000 or $100,000 is very intimidating. Nevertheless, with dedication, focus, and the desire to be financially secured, both you and I will get there.
But first things first, get that $1000 saved for your emergency fund.
I saved mine and it took me about 4 months.
In conclusion, you can decide to keep your emergency fund in a savings account, keep it more easily accessible in a safety box, or be a mini baller and have a $1000 in your savings account AND in a safety box.
That’s what I did.
And before I forget, CONGRATS! You will no longer be one of the 58% of Americans who have less than $1000 in savings!
Because I’m passionate about people learning how to build an emergency fund, if you have a friend or relative you think may find this blog post or video below useful, definitely please share.
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