Believe it or not, 69 percent of Americans have less than $1,000 in savings. This means during times of crisis, they are ill-prepared to handle any emergencies.
Thanks to the ongoing coronavirus pandemic, many people have taken pay cuts, been furloughed, or lost their jobs altogether.
How could they have been better prepared? To make sure that you’re able to handle financial situations like this, here are tips that can help you build an emergency fund as soon as possible.
Take Control of Your Spending
It’s very important to know how much money you actually have to spend and to be careful about how you choose to spend that money. You should avoid impulse buys that you don’t plan ahead for, and make sure that you’re able to add money to your savings on top of your basic living essentials.
Plan for at Least 3 to 6 Months of Savings
As you start saving money, keep in mind that you should have at least 3 to 6 months’ worth of funds available in your savings account. This amount should help cover your basic living expenses such as food and rent during that time period.
Make a Budget and Stick to It
You need to actually sit down and assess how much money you’re bringing home each month, and how much you should reasonably spend. Write every payment down and hold yourself accountable.
Go through your list of expenses and ask yourself if you really need those things. Such as, having extra movie channels on your streaming package and having a latte every day of the week.
Pay for Everything with Cash
You know the saying, out of sight, out of mind? That is especially true when it comes to spending money. To help combat this, you should keep a set amount of cash on hand that you’ve budgeted for, and don’t spend more than what you have.
You might be surprised at how much money you can end up saving by simply being able to physically see what you’re spending.
Your Savings = Paying Yourself
Instead of looking at savings as a chore, think of it as you paying yourself instead. This is money you’re saving toward your own future. The easiest way to do this is to set up your paycheck to have a set amount go directly into your savings account via direct deposit.
Set Reasonable Financial Goals
You might want to go all out when you first start to budget but keep in mind that setting reasonable goals can be more realistic over time. Remember that no one climbs Mount Everest overnight.
You can set a larger goal if you like, but provide smaller steps to help yourself reach it without leaving yourself feeling defeated.
How to Build an Emergency Fund in the Quickest Way Possible