So, how do you go from a small savings balance to having six months of living expenses on hand? Change your mindset, and change a few habits.
One question that is asked frequently is, “How can I build an emergency fund when I'm trying to pay off my debts?”
If you’re starting from scratch with your emergency fund, build it up to one or two months of living expenses, and then accelerate credit card payments above the minimum payment required. After you've paid down your debt, boost payments to your emergency fund.
Below are several ways to boost your emergency fund and change your savings habits:
Treat savings as a bill. Figure out what you can afford to save each month and put that amount into savings. No matter the amount, even $10, it adds up and is habit-forming. As your situation improves, increase the amount you're putting away.
Stash your tax refund or bonus. Although a cruise sounds fantastic, adding all or some of this money to your emergency fund can put a large buffer into your savings cushion.
Give your savings a garage sale boost. Sweep through your house or apartment and purge anything you no longer want or need. Sell your things at a yard sale or through eBay or Craigslist. You might want to check out a consignment shop to potentially get a little bit more money for your stuff. Funnel all of your profits to your emergency fund to give it a big boost.
Round up. Say your monthly utility payment is $55.43 year-round. Budget that amount for $60 instead. If your mortgage payment is $752.54, budget for $800. Even amounts make budgeting easier, and you'll be building a buffer at the end of each month to funnel over to your emergency fund.
Save your change. Put your pocket change into a jar or container each day. Use a container that is difficult to open so you are less tempted to take money out.
Live one raise behind. Budget using your old income and apply the extra amount to your emergency fund.
Trim the fat. Look through your bills and see where you can save some money. Can you forego the premium TV channels or paid TV for a few months? Utilize Netflix or Hulu to replace TV entertainment and funnel your savings over to your emergency fund.
Automate it. If the money's not in your wallet or checking account, you're less likely to spend it. Use automatic transfers to funnel money over to your savings account and practice out of sight, out of mind.
Call us at 1.800.897.6991 or stop by one of our branches and we can help you set up short-term and long-term savings goals that fit your needs.