How To Start An Emergency Fund
It is best to be prepared for the future rather than worrying at the end when life hands you lemons. What people fail to realize is that life is unpredictable. You never know what the future holds. While your life can be a bed of roses right now the next day, everything can crumble. While you cannot stop bad things from happening to you, you can make an effort and be prepared for them.
Money matters are some of the biggest and most volatile problems that most of us face. Financial stability is something all of us crave badly. Having no money while you have lots of things to do can be quite devastating. This is why when days are rosy you need to put some money aside and save up for rainy days. How should you go about saving money? Well, you can start an emergency fund.
What Is An Emergency Fund?
An emergency fund is as per the name- a fund that you can use to save money for when you have an emergency to deal with. If you, unfortunately, have an emergency, this fund will be enough to take you out of the tricky situation. It is best to use your own money rather than loan it from someone. When you loan money from someone you add extra pressure to your life that you don’t need. This is why you should save yourself the stress and start your emergency fund. The question now is, how to start an emergency fund? No need to worry as we have that covered for you. You can use the following steps and get started with your emergency fund:
1. Track Your Expenses
It is very important for you to track all your expenses so that you know exactly what you are spending your money on. You must get a set amount of money monthly and have your expenses in the same way. If you want to ensure that you are saving enough money you need to keep track of the expenses that you are making. This will not only help you know where all your money went by the end of the month but it will also help you keep your expenses within limits. You will be mindful of your expenses and that will help you save even more money than before.
To track all your expenses you can keep a diary with you and not down every purchase you make. Do not miss out on any expenses whatsoever and be sure to include each and every one of them. It is an even better idea if you want to save receipts, this will help you countercheck all the purchases you make. If carrying a diary is too much of a hassle for you, make a spreadsheet on your laptop or better yet, you can download any application online and use that to track all your expenses.
2. Set Your Price
It is only you who knows how much money you are making on a monthly basis, what your expenses are and exactly how much money you can save. This is why it is you who needs to set a goal for yourself as to how much money you need to have in your emergency fund. Look at your financial condition and come up with an amount that you think you should be able to save easily and would be enough if you ever have an emergency. It is best to push your limits as you need to be able to save a considerably big amount. You never know what the emergency is going to be which is why it is best if you save a big amount of money and can rely on it.
For instance, if you already have insurance and other amenities such as your own house, a personal car, and a stable job, you can take the risk of setting a low goal. If you do not have any of that it is wise to save as much money as you possibly can.
3. Devise A Strategy
You cannot save money if you do not have a plan in place. Before you even start saving a dollar you must have a plan in mind that you can follow. Sit down with all your expenses and look at each aspect closely. Calculate all the expenses that you make on a monthly basis and then remove that from your monthly income. This will give you the amount of money you have in your hand and can save.
It is not important that you save all the money that you have left but you can spend some of it. You can get anything that you have been wanting for a long time but at the same time, you must save a considerable amount of money you have left. Your strategy can also include all the things that you should not spend your money on. For example, if you have a habit of spending too much money on junk food, you can try and refrain by making sure that you only spend a certain amount of money on food.
4. Keep Your Money Safe
Where you are going to keep your money is a big question. You shouldn’t just let your money be sprawled around the house. It should be kept safely so that you can easily access it when the time comes. Experts suggest that the best place to keep your money in a liquid account. A liquid account allows you to access your money whenever you want. You can withdraw as much as you want from it and use it however way you need to.
Or if you are feeling adventurous you can keep your money in an account that gives you a monthly profit. That way you will be able to expand your savings greatly. Whatever you do, do not fall for pyramid schemes in the want of getting more money.
5. Stay Steadfast
When you have come up with a game plan, the only thing left for you to do is stay on track. Staying on track will only benefit you and no one else. You must keep reminding yourself that you are doing this for all the times you have been in financial trouble before and did not have the funds to pull yourself out of them. Sticking to your plan will help you save up the money you have been aiming for from the very first day.
P.S. Here is a really great tool to help you kickstart your emergency fund. Click this link to check it out!