Life is not a bed of roses. You may experience unpleasant and unexpected incidents in your life in which you need an emergency fund. Bankrate reports that 1 in 5 Americans don’t have an emergency fund. You never know if or when an injury, a financial loss, a disaster, a disease, or a bad situation will happen to you. You will need extra cash to deal with those types of situations. I know it’s not like a walk in the park. Luckily, there are ways that you can save money even if your income is low. In this article, we’ll blow your mind with amazing strategies that you can use to build an emergency fund. So, stay hooked.
7 Tips To Build An Emergency Fund
We’ve bent backward to help you save money for emergency purposes. Let’s blow the lid off.
Set Smaller And Short-term Saving Goals
Have you heard the phrase, slow and steady wins the race? That’s the best strategy to reach your biggest goal. You have to make a smaller initial goal and try to reach that goal. Once you successfully save a little money, you’ll feel motivated to save more money and set higher goals. You would reach bigger targets as you slowly and gradually climb the ladder. Suppose you set a higher goal in mind; you might not be able to achieve that goal. Believe me, if you set smaller and short-term goals, you will have an emergency fund at the end of the day.
Start Small And Monitor Your Finances
Does your head start spinning when thinking about building an emergency fund? Well, never fear m’dear. If you start small, you won’t face any difficulty saving money for your hard times. Set a small amount every month for creating an emergency fund. Don’t think it is too big to make an emergency fund as early as possible. Keep track of your income and expenses, and don’t feel stressed out. You simply need to figure out what things you can exempt from your life upon which you’re spending money. Like, if you’re addicted to watching movies and going to cinemas, spend that time on any other useful activity. This will stop you from spending on useless things, and you will be able to save a lot for your emergency fund.
Choose A Savings Account
Saving money in a savings account is a great idea to compound your savings. Another advantage is that you can easily get access to your savings when in need. There are a variety of ways to save money. Let’s look into a few account types that you can use to save money for building an emergency fund.
- High-yield savings accounts: With a high-yield savings account, you can get an annual percentage rate (APY) greater than other traditional savings accounts. In case of emergency, you could get the amount by transferring it to a checking account.
- Certificates of deposit (CDs): Certificates of Deposit accounts allow you to enjoy a guaranteed rate of return on keeping money for a specific duration in your account. However, when an emergency arises, you must pay the penalty fee for withdrawing money.
- Money market accounts (MMAs): These accounts have a greater APY than traditional bank accounts, and you are given a debit card to withdraw money in times of emergency.
Earn Passive Income
If you feel like you can’t save money and even spend the money that you have, invest your money into a profitable business niche, for example, cryptocurrency. The crypto industry has become so popular that millions of people have started investing their money into crypto, and they earn a huge profit by using auto bots like Bitcoin Bank. It’s a great way to earn passive income. However, there are other brilliant ways to earn passive income. For example, if you’re a blogger or a website owner, you can become an affiliate marketer. Or you can invest in stocks, bonds, and other digital assets.
Automate Your Savings
If you’re a person who can’t control expenses, you should automate your savings. Ask your employer or HR to send a portion of your salary to a separate account you can’t access easily. You will receive your salary in another account that you have access to. You won’t have to put aside some money for an emergency fund. It will automatically be sent to your other bank account. Forget about that account and consider your salary for your expenditures. In this way, you can build an emergency fund.
Don’t Open New Credit Card
Say a big NO to opening a new credit card for dealing with monthly expenses. You will get entrapped in it, and all your salary will finish paying the bill of the credit card. At the end of the day, you’ll have nothing left in your account to save for an emergency fund. When you have the option to buy something, you always avail it. Therefore, don’t let yourself get caught in credit card debt. Instead, cut your coat according to your clothes.
Balance Your Debt And Your Emergency Fund
Always remember that saving money will yield nothing if you have to pay debt. That’s why do not forget your debt. You have to clear your debt as well as save money to keep a balance between both. My point number 3 will help you out regarding this. When you automate your savings, you will easily clear your debt and save money silently, even without knowing yourself.
The Crux Of The Matter
Believe in the phrase, “A penny saved is a penny earned,” meaning money never goes wasted. It would be wise to save money for a rainy day. If you follow the tips above, you could easily save money for future unseen incidents.