If I could give everyone one financial tip today, it would be to build an Emergency Fund quickly. Why quickly? Well, 57 percent of Americans can’t cover a $500 expense right now. That is essentially one trip to the mechanic. Without being able to cover this expense, many people resort to using credit cards, increasing credit card debt and the amount of interest being paid.
Money can be a stressful topic. It seems as though there is not enough of it to go around. Just when you think you have a little breathing room in your budget, your car starts making a weird clicking noise, the little ones need new shoes, or an unexpected bill shows up.
If we could eliminate the stressors of the smaller and larger emergencies, we could then remove the stressors around money and prevent going into debt for the expense.
What is an Emergency Fund?
An emergency fund is a separate stash of money used to fund emergencies and unplanned expenses. Some unplanned expenses include car repairs, home repairs, and unplanned loss of income.
How Much Money Should Your Emergency Fund Have?
This is a personal decision, but it is recommended that one have 3-6 months of expenses saved. For some people, this is only expenses for 3 to 6 months of basic needs. For others, these expenses will keep them comfortable with life’s extras, such as cable TV and kids’ extracurriculars.
Either way, calculating what you spend monthly and multiplying it by the number of months you feel comfortable with is the best way to find your starting point. If your monthly expenses are $5095 a month and you want a four-month emergency fund, you would multiply $5095 by four and get $20,380. I would then set a year to 18-month goal to fund that with these six tips below.
Complete a No Spend Challenge
This is one of my favorite ways to begin saving money immediately. Just. Stop. Spending. When we consider how much money we spend, particularly on things we don’t need or don’t serve us, we can find extra money all around.
I completed a 100-Day No Spend Challenge earlier this year. During this challenge, I opted out of buying any material items. I continued to spend money on consumables and experiences, and do you know what happened? I did not miss anything.
When you complete a no-spend challenge, you curb your spending habits. You get used to replacing roaming around the target with hiking, reading, or hanging out with kiddos. There were many challenging times when I had to talk myself out of things that I knew I had no real want for, and it was so worth it. I was able to max out both my husband and my Roth IRAs within that time.
Increase Income
There are two ways to increase your income. One is to find a side job to help bring in income or to work toward getting a raise at your current position. The latter may take a little longer to achieve, so I am recommending the infamous side hustle for all intent and purposes.
Side hustles have begun to get a bad rep. Rightfully so with the many scams that promise us to make money faster than actually possible. We want to fund our emergency fund quickly but not at the expense of being scammed or burned out. With so many options available, stick to a trusty few. Ridesharing, delivering food and grocery, taking surveys, babysitting, or optimizing a skill are good ways to make some extra money in our free time.
Cut back on Extracurricular Outings
Whew! I said it. Stay AT Home. Okay, I’m joking… only slightly. Being out can be expensive (I’m looking at you, Starbucks). Therefore, plan your outings and fun experiences strategically. Invite people into your home for a game night, or everyone head to the park, but look for ways to cut costs because outside is expensive.
Sell Everything You Don’t Need
When we started our debt-free journey, I did not have a job. So I began selling whatever I could get my hands on to contribute to the debt payoff. Facebook Marketplace was not the hype it is now, but between Garage Sales and Craigslist, we began to make a considerable amount of money. If you have some things you have been meaning to unload, start here! I would set a goal to list a couple of items each day. Keep track of what you sell and how much you make. This is an easy and quick way to build an emergency fund quickly.
Track Your Spending
At the end of the pay period, are you wondering where all of your money is going? I have been there. I have also been in a place where I know money is slipping through, but I refuse to even check the statement. It’s because I didn’t want to know. Tracking your spending will help you figure out where your money is going. There was a slow leak in my wallet and to figure out where it was I had to track my spending and evaluate was my spending habits were serving me our my financial goals. Surprise, they were doing neither.
Sell a big Ticket Item
This isn’t a tip for everyone, but it is for those willing to let go to move forward. Think boats, ATVs, or even a vehicle when I say a big ticket item. Sometimes we have big-ticket items we can let go of, which will build an emergency fund swiftly. In this event, money may be left over to work toward your next money goal.
Save Windfalls
Don’t you love a good windfall of money? A lump sum such as a pay bonus, income tax, or inheritance may be just what you need to quickly build an emergency fund. These windfalls don’t happen very often, but when they do, we can often look over our financial goals for those favorite things we have been eyeing. It’s okay to have some fun money but even better to have a fully funded emergency fund.
I have tried a little of everything when saving money, so I know that not everything will work for everyone. What I do know is when you are determined to change the directory of your family tree and build a life where you are not tethered to a job, you can get very creative in how you do it. In what ways have you saved money quickly?
