Ever thought of saving money for an Emergency Fund? Let’s look at some of the ways you can build and save money for an emergency fund.
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Emergency by definition is a sudden, urgent occasion requiring immediate action. Saving money is not an exact art, and neither is it an exact science. Nevertheless, it is always a best practice to save money in case of an emergency.
Initially, you may find it challenging to save money for emergencies; maybe you’re already operating on a tight budget; perhaps you’ve tried making savings a priority before and failed.
Here are five simple and easy ways to help save you money for your emergency fund.
Start saving from when you start making money, not after spending it all
There is an excellent notion when it comes to financial planning, and it goes by “Always pay yourself first.” This first and foremost way of saving money is not to wait and see how much money you are left over with after you pay for your expenses, instead strategize the money that you make by putting aside a small portion towards your emergency savings before you do anything else.
Once done, discipline your mind not to use any funds saved in the saving account towards any other expenses but for an emergency.
Set aside a few bucks automatically
As discussed in Five smart ways to save money effortlessly, Begin by allocating a portion of your weekly or bi-weekly paycheck that gets deposited in your checking account and setting up an automatic transfer from your checking account to your savings account balance that way you won’t miss out on the opportunity to put aside money for an emergency.
Take advantage of your employers 401K contribution
Although this strategy may require some time, it becomes very effective in the long run. Most employers offer their employees a 401(k) match dollar for dollar match. You must take advantage of this opportunity as this is the best kind of free money that is available to you.
Once your employer matches a portion of your 401k contributions, build up to investing enough to take advantage of the match.
Save any extra money that you receive
Any extra money that comes in, for example, you won a lottery, got a rebate check, a tax refund or your grandma gave you an additional $40.00 for your birthday, but it all to the side and add it to your emergency fund balance. Over time, it will help grow your savings goal and add money to your emergency fund.
Pay off your debt quickly
Once you have paid yourself first (see above), Pay off extra on your mortgage or any other obligation. Directing additional funds to pay off debt early will allow you to save more in the long run. Furthermore, prepaying your mortgage will save you from paying off additional interest as it will lower down the principal balance thus lowering your interest paid overtime.