How Do You Start an Emergency Fund?
Although everyone knows they should put money away for emergencies, very few people actually have emergency funds set aside. There are many reasons that people aren’t able to save money. Maybe you’re operating under a tight budget or maybe you’ve tried to save in the past and failed. Regardless here are some answers to a question many people ask – How do you start an emergency fund?
The most effective way to save money is to pay yourself first. This means you shouldn’t wait to see how much you have left over to save at the end of the month.
Instead at the beginning of each month start budgeting a portion of your check to put in an emergency account when you pay your other bills.
Rather than trusting yourself to put a portion of your pay into an emergency fund each month – automate the payment. Set up an automatic transfer from your checking account to be your savings account. This way there is no chance you’ll forget to pay yourself.
Save anything extra.
Fight the urge to spend extra money! Rather it’s a work bonus or a $20 bill in a birthday card from Great Aunt Hilda, put it immediately into your emergency fund. Saving extra money should be easy since you weren’t budgeting for this extra cash anyway.
If you are operating on a tight budget there is only one way to begin saving money; stop spending. How many times a week do you eat out? Are there any subscription services that don’t need/use? Do you really need that new pair of shoes? Review your budget to find out where you are spending unnecessarily and start putting these funds into your emergency fund instead.
Make your money work for you.
Get your money into an account where it’ll accrue interest over time and grow on its own. A few examples include money market accounts, high yield saving accounts, and CDs. Every extra dollar counts. Therefore it’s best to shop around to find out which type of account is currently providing the best returns.
If you have questions about starting an emergency fund or any investment account, contact the financial professionals at Potter & LaMarca today!