You never know when life is going to throw you a curveball. One minute, things may seem to be going your way, and in the next, you’re wondering what happened. An unexpected emergency can be almost anything. For some, it’s the sudden loss of a job or a medical emergency. For others, it can be something less life-altering, like an unexpected car repair, a flooded basement, or other home problems. Unfortunately, these crisis situations are often financially taxing as well. To help ease some of the stress that naturally comes with these situations, it pays to have a little emergency cash set aside.
How Much Should You Save?
The thing about emergencies is that they’re a mystery. You never know when they’re going to happen, how long they’re going to last, or how much money you’ll need. Because emergencies aren’t one size, it’s nearly impossible to recommend a dollar amount that will work for everyone. Instead, try thinking of how much you’ll need in terms of living expenses. Financial experts recommend establishing an emergency fund that will cover at least three to six months worth of expenses. If you’re self-employed or have an unpredictable or uncertain source of income, up to a year’s living expenses is best. It’s important to differentiate this type of savings from your normal savings account. The two aren’t the same: Keep your emergency savings strictly for emergencies only.
How to Get Started Saving
If you’re like a lot of people, saving money for something that doesn’t offer instant gratification can feel like a challenge. Fortunately, starting a savings fund is something that everyone can do with a little planning.
Cut Unnecessary Expenses
Almost everyone spends money on something that isn’t a necessity. From that daily stop at a coffee shop to the magazine subscription that rarely gets read, these things have a way of adding up every month. Prepare your lunches, go over your budget, and prepare to cut out the fluff. The money that you save will likely be more significant than you realize.
Have a Yard Sale
Spend an afternoon combing through your home for items that you don’t use, want, or need. Even if you don’t have a yard to sell it in, you can still make a few extra dollars by posting things on the Internet using online classifieds or marketplaces. Selling old books, clothes, and knickknacks is an excellent way to both contribute to an emergency savings fund and tidy up.
Set Up an Automatic Deposit
Don’t trust yourself to put money into a savings account? Automate your savings instead. If you have direct deposit, you can arrange to have a specified amount of your pay put into an account for emergencies. With this method, you don’t have to think about doing it and you won’t miss that it isn’t in your primary account.
Use Your Tax Refund
Taxes may be a yearly pain, but if you’re lucky, you’ll get a refund. Although it varies some by state, the average tax refund in the U.S. is close to $3,000. Instead of spending it, save it. Even if your refund is less, it can make a great start for or addition to your emergency savings.
Get a Part-Time Job
If you’re already working full-time, this option may seem less palatable than the rest at first glance. But although it’s bound to take up your free time for a while, a second job is one of the fastest ways to build up an emergency savings fund. It doesn’t have to last forever, just until you’ve saved the desired amount or more. Not only will it quickly get you where you need to be, but it won’t cut into your regular pay, which can be a plus for some.