Saving money is easier when you have a plan, which is what these tips for building an emergency fund are all about! A stash of of cash will help you feel more secure and able to deal with financial emergencies.
You need an emergency fund because you never know when you’ll be facing job loss or health problems. Here, financial expert Ethan Ewing shares nine steps to achieving your financial goals.
“By implementing some or all of these steps, you will see your savings account gradually growing,” says Ewing. “If you need it, it will be there for you; and if you are fortunate enough not to need it, you will soon find yourself with a sizable nest egg.”
If you struggle to save money (and have expensive tastes), read Frugillionaire: 500 Fabulous Ways to Live Richly and Save a Fortune.
And, here are Ewing’s tips for building a stash of cash….
9 Tips for Building an Emergency Fund
1. Save your store “savings.” If the grocery store register receipt says, “You saved $17.52 today,” then transfer that amount into a savings account. “You will be driven to hunt for bargains, as every deal means you pay yourself instead of a retailer,” Ewing said.
Read 7 Tips for Saving Money on Your Grocery Bill for more ways to create financial abundance.
2. Ignore a pay raise. “Most people are not getting a raise in this economic environment,” Ewing acknowledged. “But if you did get one, budget and spend as if you did not. Set up automatic savings withdrawals equal to the amount your paycheck increased (or for even better results, round up that figure).”
3. Remember that anything and everything counts. Prioritize savings and set aside the largest amount possible. Turn a monthly savings goal into a “bill” to be paid along with other bills. To build your emergency fund of money, have a bank automatically transfer the money into a savings account.
4. Stick to a percent. Vow to save a certain percentage of all income. “Ten percent is an excellent start, but even if it’s lower, choose a percent and stick to it,” Ewing says. “Whenever you receive a paycheck or other income, set aside that pre-determined percentage.”
5. Sock away financial bonuses or windfalls. Save any extra money — whether from a larger client check, a gift, a tax refund or activities such as a yard sale. Even small amounts count, such as a rebate or a co-worker’s repayment of a $10 lunchtime loan. By stashing the extra – in addition to a regular, pre-determined amount – your emergency fund savings will soar.
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If you’re lucky enough to be able to put this tip for building an emergency fund into action, read Found Money! 7 Things to Do With an Unexpected Financial Windfall.
6. Make work pay. The Making Work Pay credit of $400 per eligible worker will, in most cases, provide an additional $11 in each weekly paycheck from April 1 through year-end. To build an emergency fund of money, save that money – because every little bit counts!
7. Adjust tax withholdings and save the difference. Those who received an income tax refund this year should discuss filing a new W4 form with their employer. The IRS online calculator can help to determine how much should be withheld to cover next year’s tax bill. To build an emergency fund of money, put the extra paycheck cash into savings.
8. Keep your money safe. Emergency fund money should be kept safe and accessible. It should not be in stocks or other investments that might lose value. Good options might be in a money market fund or rolling certificates of deposit (CDs). The funds will be earning interest, and cannot be spent without forethought.
9. If you borrow from your stash of cash, pay it back immediately. “If you must spend your emergency money, try to replenish the fund as soon as possible,” Ewing counseled. Cut costs wherever possible to replace savings. However, always continue making at least minimum payments on debt, and always prioritize a mortgage payment.
How about building an emergency fund by visualizing your money? Read Money and the Law of Attraction – 4 Ways to Attract Wealth.
Do you have any thoughts on building an emergency fund of money? Please comment below!