Saving Money Tips
It’s a fact of life: Unexpected emergencies happen to everyone regardless of age, gender, hair color, eye color, or which gym you belong to.
It could be a blown transmission on the car, unexpected medical expenses, or even worse, the loss of income for over three months due to a global pandemic and the rapid spread of a novel virus (I digress).
How prepared you are for one of these situations can make all the difference in a stressful time. But 45 percent of Americans say they do not have enough savings to cover at least three months of living expenses, according to a report by the Center for Financial Services Innovation. Non-discretionary spending… that is the necessities in life, such as rent and food. (This does not include Starbucks runs, Salad works every other day for lunch, and charging 20 Smart Waters to the Spa Account in 1 month. Yes, I am exposing myself.)
By taking steps to start an emergency fund you’re giving yourself the security of knowing you can cover unexpected expenses should the need arise.
To build a sufficient emergency fund AKA rainy day fund, here are 4 easy steps (casual suggestions/conversation from someone who has a degree in Finance, obligated to take the CFP at some point (*NOT CROSS FIT PEQUANNOCK*, mediocre day trader) I got this out of a textbook and I cannot guarantee this works for everyone :)
1. Start with baby steps
Set a benchmark for your emergency fund—anywhere from 3 to 6 months of expenses. You may need to take some time to see how much you are actually spending to figure out how much you actually need.
Build up to $500 before you have $1,000 saved in your emergency fund
2. Choose a place to keep your emergency fund
When you start an emergency fund the purpose is to have quick, easy access to your cash. To accomplish this, consider keeping at least the first three months’ worth of expenses in a high interest savings account so that you can access it at any time. AND…. i cannot stress this enough…. KEEP IT SEPARATE FROM YOUR REGULAR CHECKING ACCOUNT
3. Make contributions automatic: 2 words… direct deposit
4. Continue building when needed
Finally, it’s important to remember that just because you might have reached your long-term goal to start an emergency fund, you shouldn’t stop there.
If this pandemic has taught us anything, it has shown everyone circumstances change FAST.
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