How can I afford to build an “emergency fund” ?
The usual method of encouraging savings is “pay yourself first” by immediately transferring money from your paycheck into a savings account, before you have an opportunity to spend it. If possible, disable ATM access and the like. If you poke around on the money blogs there is a lot of debate about the best strategy for doing this if you have debts to pay down. Some people like to fill the fund first, others gradually along with other payments, and still others think debt paydown takes priority so that when emergencies happen you have the cash flow to deal with them. I would personally set some interim goals, such as building up one month’s salary in the first 3-6 months, two months in the next interval, and so on. Of course, you must also actually save the money for real emergencies, and immediately start refilling it if you have to use it for anything. Note, by the way, that life insurance is a pretty easy way to do this. Not only do you have an emergency fund that you can loan to yo
You can help yourself be ready for a financial emergency in several ways. First, in addition to increasing the income you would have during that time, reduce expenditures. Right now, look through your monthly expenditures and see what you can cancel. Are there debts you can consolidate under a credit card consolidation loan with a credit union, under a smaller interest rate? Are there services you pay for but don’t use (cable premium channel packages, too-large cell phone plans that give you more minutes than you ever use, etc.)? Are there expensive habits you can replace with cheaper ones (takeout pizzas versus frozen pizzas, etc.)? More radically, most people’s biggest expense is rent. Is your apartment overly spacious? If you are in a 1-bedroom, would you be equally as happy in a studio, etc.? Second, create an action plan now. Imagine your employer calls you in and fires you this afternoon. What would be the next steps you would want to do? You may be too upset or flustered to thin
Set aside a couple of hours. First convince yourself you’ve just lost your job, and you have no promising job prospects given the economy. Then, look at your bills. – Keep in mind you will be traveling less since you’re not going back and forth to work. You’re grocery cost may be lower depending on whether you brown-bag it for lunch or buy something to eat. – If you have both a cellphone and landline, ditch the landline, if you have DSL look whether there’s a local provider for naked DSL. Cable TV, then probably cable internet, the TV channels can go. – Consider your electricity usage, everything from lights and heat and a/c, to whether using a garage sale toaster oven would be more efficient than the full-size oven. – Look around your home for things you can sell, locally on Kijiji or Craigslist, or through eBay. – Strip everything down to the bare minimum, after all you may need to move to find a job anyway. – Then, look at what your expenses would be in reality once utilities are tr
Once you get into the saving mindset, you need to bear in mind that your opinion on spending changes (or, at least, it can). Even if $9000 seems a lot now, once you get into the right mindset, you’ll start adding any gift money you receive to the pot, you’ll think twice before buying certain items, and likewise – all of this will help the pot grow quicker. A few years ago I had no savings at all. Now I have quite significant savings.
For the longest time I was financially overextended (largely due to unnecessary lifestyle spending), but at some point not too long ago I decided to set up an automated monthly transfer from my checking to my savings account. It was very small – the cost of a few meals out, maybe. Before I knew it, I had a one-month buffer. I was able to increase the amount of the automated transfer a bit later, and now my buffer is even healthier. So, I recommend something automatic and regular (every pay period or every month) as a great way to save without thinking about it. If $1K of that $18K is just not in your checking account when you budget, you’ll figure out a way to make it work.
Related Questions
- In the midst of budget reductions, how can we buy laptops for every 7th grader and how can we afford to build a replacement for Panther Lake Elementary?
- Can we afford to build anything substantial in the present economy, and would younger parishioners be able to afford it?
- If the Haitian Government can’t afford to build the schools, then who will maintain and staff them once built?
