Preparing for unforeseen circumstances has never been so easy. Here is everything you need to know, including 6 frequently asked questions.
Saving without a goal in mind is a reasonable way to begin your journey of better spending habits.
But the key to adulting 101 is to have your finances in order and become aware that you can't expect every curveball. While it's impossible to prepare for everything, an emergency fund is guaranteed to reduce your stress and worry.
But what is an emergency fund?
Easy to access funds, set aside for an unexpected event such as a car wreck, loss of income, home repair, or broken appliances.
In simple terms it is money used for any sort of disaster. If you follow me on Instagram then you’ve already seen a few post divulging tips on how to save.
Whether or not you already have an emergency fund may depend on your current financial state, but it's never too late to start. And remember that your definition of an emergency may be different from someone else's.
Graduating on time is a goal of mine and an unexpected tuition bill was considered an emergency. I found out 1 week before summer courses began that I was missing a class needed to hit my 120 credits.
My job informed me that budget cuts would be happening later in the year and that was my signal to start creating a safety net.
Keep reading to find out everything there is to know about starting an emergency fund and what you should prepare for.
Why you should have an emergency fund
Life happens. Life is expensive. And it’s impossible to plan for everything.
You need to have money put aside not just for a vacation or a home thats in the future, but funds specifically for when everything gets turned upside down.
How can you start one?
Simple! Take $5 out of your wallet and put it in a jar.
Let go of expectations. Ignore the influencers telling you that they have 18 months of expenses saved and plan on adding $500 every week.
It doesn’t take away from your efforts. If all you can save is $20 a week then that is all you can do.
Organizing your finances is a huge step toward stability. For this specific fund, it shows you which area you are able to take away from in order to build your savings.
What should I plan for?
How much you want to save depends on your lifestyle. Prior to the coronavirus I was absolutely positive that $500 was a decent goal. But with jobs being deemed as essential or unessential and the possibility of working remote up in the air, you need a nice cushion.
I recommend saving at least one month of rent and then working toward 3-6 months of expenses.
Have several subscriptions? Netflix, Hulu, Disney + and the highest cable package are unnecessary to save for. Realistically, you need
a place to sleep
Now how do you save if you don't have much money to start with or you're living pay check to pay check?
Lifestyle changes to implement
Budget and Shop Smartly.
It’s possible to buy food for a family of 4, pay your bills, and save. But you have to have patience. You want to save money on a weekly budget and give yourself time to do better in your spending habits.
It could mean going to a vegetable stand for healthy fruits and vegetables instead of a shop or going to a store like ALDIS. Buying generic items doesn’t mean you’re broke.
It means better decision making. I will be the first to admit I do not like sugar that isn’t Domino Brand. But there is nothing wrong with the other generic products that you can buy.
Wait for sales
Not the let me go to TJ MAXX and shop randomly sale, but sneaker sales, where you can buy both of your children a pair of shoes for the price of one. Famous Footwear is known for having buy one get one half off.
Think about what you’re buying
Don’t categorize it into good and bad shopping. Or what you should or shouldn’t do.
Simply consider shopping online or waiting to make a purchase.
Self care is about taking charge of every area of your lifestyle and future. In the mean time you'll accept the past, and make your present something that doesn’t drive you to frustration and tears.
Consider making extra money
Side hustle. Second source of income. You can call it what you want.
For some the idea of selling their own work makes them feel doubt and worry. Instead of asking why would any one buy your stuff, tell yourself you have something to offer that's just as good.
Because honestly, what makes your talent or skill so different from someone else who once was a beginner as well?
You don't have to have to be an expert you simply need to be willing to try. Everything can advance with practice.
Determine whether you want passive or active income
You can pick up a part-time job.
You do not want to burn out because you have taken on too many task. You can save money without having 2 jobs. You will however, have to adjust your daily spending habits. Even if you don't put away $1000 in a month, you will still be able to save.
Cash vs Saving account
Method 1 Savings account
A savings account with Chase, allows you to build 0.01% of interest when you open an account and the other option would be a higher yield account
Keep in mind you will have to report it on your taxes but the IRS taxes you for having an account open, not for the amount you save
Method 2 Cash
Cash savings are yours, the money will not change unless you allow it. But you need to have the ability to not only save, but avoid frequently dipping.
An emergency fund should not be confused with sinking funds, which is more for an intended purpose.
Sinking funds = knowing in advance you have to pay tuition or buy holiday gifts.
But what if you have to dip in?
First step- don't beat yourself up. It happens to everyone.
Now you can either change the method in which you save your funds or simply replace the money and continue on your saving journey.
In conclusion have patience and exercise self care as you nurture your wallet. Taking baby steps is a straight and bumpy path toward success once you begin.
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