Being prepared for whatever lemon life throws your way is essential for our survival. Whether your preparedness is tangible or not, your readiness can lead you to better adapt to unfamiliar situations. Unexpected events, after all, don’t make their announcement once they come hollering down at you.
Saving for the future is an indication of your preparedness. Nowadays, it’s easy to save for your future home or your future kids’ education. Many adults, though, sometimes neglect the importance of having an emergency fund set up.
Some are even confident with the savings they already have stowed away. This is a dangerous mindset, knowing that emergency funds can wipe out your other savings and more.
What are Emergency Funds?
An emergency fund, as the name suggests, is a type of fund dedicated to cover for the financial surprises you might encounter in your life. And these surprises aren’t the fun kind. Emergency funds can be used for sudden medical expenses, home repairs, car troubles, and job loss. All these examples listed are costly, especially for the unprepared.
It’s naïve to think that you’d never need emergency funds since you won’t have any idea what tomorrow brings. However, there are many reasons why an individual couldn’t set up an emergency fund for themselves or their families. It could involve external factors or issues with money.
Many young adults, especially new graduates, find difficulty with saving when they’re currently dealing with student loans. They believe the faster they pay off their loans, the closer they are to freedom from this financial burden. Not only that, many believe that just because they’re young, medical bills pose no threat to their income.
Another reason why many put off saving for emergencies believe that credit cards can answer their needs. However, it’s never a good idea to use a credit card for emergencies. A credit card can put you into debt, one that is more than what you can repay.
If you do plan on getting a loan for emergencies, at least use one that has lower interest rates than credit cards, just like personal loans from Credit Ninja. By typing www.creditninja.com – personal loans on the search bar, you can easily find their site for your lending needs.
5 Easy Steps to Start Your Saving
Set a Goal
Whenever you start saving money, you should always have a goal of the amount your emergency funds should have. Many recommend saving money somewhere between three to six months’ worth of expenses in your emergency fund. Some experts also recommend that having a few hundred dollars can quickly get you started on an emergency fund, especially if you’re a beginner. Others, though, would prefer if the emergency fund is worth as much as an entire year, or maybe more, of your salary.
Track Your Monthly Income and Expenses
Knowing how much you spend and how much you earn is vital in reaching your goal. Consider listing all your expenses within a month and cut down on any unnecessary purchases. Living paycheck to paycheck can be a dangerous method of handling your finances, which is usually justified by the thought of ‘still having money left.’
A general rule of thumb is don’t spend more than what you can earn. Learn how to budget your monthly income, so you still have some left for savings. A budgeting method such as a 50-30-20 rule can help guide you with managing your expenses. Also, stop buying things you don’t need, especially ones that can hardly be covered by your monthly income.
Sell Unused Items
A way to get extra money for your emergency fund is scavenging your home for items you rarely or never use. That designer dress you wore only once and never planning to wear again? Sell them online. You have furniture in your basement gathering dust and never seeing the light of day? Post them on online shopping sites. The gist is, don’t just keep on buying and buying. There is money in unused items, money that can smoothly go to your emergency funds.
Get Yourself a Side Hustle
There are always other ways of earning money without relying on your job alone. If you have a skill you’re good at, such as arts and crafts or blog writing, consider monetizing them in your spare time. If you love the hobbies you do, then you wouldn’t have to think of it as another job that can help you earn money.
However, if you don’t have a hobby you think you can utilize, don’t fret. You can still get yourself a side gig that can be used to earn money. This includes being an Uber driver, putting an extra space in your house in Airbnb, or even managing social media sites. No matter what it is, as long as it can add up to your funds and easy enough to do in your free time, do it.
Stick to Your Goal
Let’s all admit it, sticking to your goal of saving money can be hard. Life can get in the way, or maybe our inner demons keep on whispering about that thing we want to buy. However, as long as you pep talk yourself about the importance of having an emergency fund and being disciplined, you’d surely reach that goal you’re aiming for.
Emergency funds are essential not only for our financial needs but also for our wellbeing. Stressing over where to get the money during an emergency can be bad for us. There might be many reasons why we find it hard to leave some for saving. However, it’s never too late to start now and getting the financial security you need.