If you find shuffling money into your emergency fund each month a challenge— you are not alone.
In fact, according to CNBC, 66 million Americans do not have any money set aside for emergencies. It’s easy to push savings to the side when there are bills that need to be paid and the activities you want to enjoy. However, if there is one thing that’s certain about life— it’s uncertain.
Be prepared for life’s contingencies. Follow these 5 tips to build your emergency savings:
Oftentimes, the first question individuals ask when planning their savings strategy is, “how much money should I have set aside”? Ultimately, this number varies on a case-by-case basis. The recommended emergency fund amount is typically about 6 months to years’ worth of expenses. However, it is important to consider what monthly expenses you are responsible for, your lifestyle, and overall financial goals when building your emergency savings.
To avoid temptation, we recommend setting up split pay for your direct deposits. Each payday, this plan will automatically distribute a set amount of your pay into your savings account. This can help ensure that each month you are setting money aside and can help you resist dipping to your overflow cash.
Another option to start building your savings would be to transfer any remaining money from your paycheck at the end of each pay period directly into your emergency fund. This is a great opportunity to grow your savings account on a routine basis.
Save your tax refund. As tempting as it is to use this extra money to splurge, consider transferring this added bonus directly into your savings account. This once a year deposit can help increase your savings a great deal depending upon your return.
As challenging as it can be, prioritizing your spending is a sure-fire way to find areas where you can save money and eliminate unnecessary expenses. Have you signed up for subscriptions or memberships that you aren’t being used as you initially thought? Are there areas in your budget that you are overspending on? Have you even set a budget? Taking the time to review your financial habits can help identify cutbacks that you can redirect into your emergency fund.
When it comes to your emergency fund, it is always better to be proactive. Meeting with a financial advisor to strategize a plan, along with making simple tweaks to your current financial habits can help better prepare you for life’s “uh oh” moments.