9 Tips for Building an Emergency Fund
These tips for building an emergency fund of money will help you feel more secure – because you never know when you’ll be facing job loss or financial difficulties! Financial expert Ethan Ewing’s nine steps will help you achieve your financial goals and sleep easy at night… and they’re not too painful.
“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.”
For more info about finding money fast, click on How to Generate Quick Cash in an Emergency – 101 Found Money Methods! by CompTel Services. And, read on for Ewing’s tips for building an emergency fund of money….
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 info.
2. Ignore a 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. 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.
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 it 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. Pay it back. “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.
Do you have any tips for building – or having to use – and emergency fund of money? Please comment below!
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Comment by Tamara on 6 May 2009:
Every Sunday I put 7 dollars (one dollar per day) into an envelope. It is money you will not “miss,” and it can be saved for the entire year -or put towards a vacation, etc. If I do use part or all of the money, I try to pay myself back as quickly as possible.
Comment by LauriePK on 7 May 2009:
You probably wouldn’t miss a dollar a day, and yet it adds up fast. This is a great idea for creating an emergency fund of money — thanks, Tamara!
If you can find a savings or money market account that pays a little interest, you’ll benefit from that, too. Though these days it seems like it’s not worth putting money in the bank, since the interest rates are so low.
Also — Suze Orman says to put aside an emergency fund of six months’ salary if you can. Most people who get laid off or fired think they’ll find a job right away, but it often takes months. Six months’ salary is alot of money — I know we don’t have it lying around!