Unanticipated expenses can pop up out of the blue, causing a bunch of problems. Imagine your tooth pain is killing you. You wait for a day, two, but it’s not a win-win game, and definitely you will be the loser. It’s a kind of expense that needs an immediate solution. Or let’s say your car suddenly broke, maybe the pet needs expensive vet treatment. If we go on listing the expenses that can come out of a sudden, you will feel uncomfortable.
The problem is how to deal with such expenses when you don’t have an emergency fund. The numerous researches have shown that middle-income American can’t handle a $500 emergency. In fact, such people are the most vulnerable sector for being caught in debt traps. The numerous ads of credit unions and lending platforms that hit the Internet are really enticing — instant cash anytime and anywhere. But then this seemingly helping hand will lead you into a long and complicated journey throughout depts. How? You take the second loan to cover the first, then the third, and finally, you will find yourself overwhelmed in debts.
To tackle these financial curveballs, you need to build an emergency fund. It’s not that simple, you may think, especially for someone who lives on a paycheck. But it’s easier to start small than face the catastrophic impact of unplanned $300.
Cover the Budgetary Holes
Cover all the holes in your budget. It may refer to attending expensive shops, ordering lunch from restaurants, etc. You can also save on electricity and gas, and use the money to build your emergency fund.
Keep a Piggy Bank
Every evening put some change into the piggy bank. Then you will be able to accumulate more than $50 a month. Even with a tight budget, you can get around $300 cash in six months.
Automatic savings
Setting your funds on automatic transfer will help you save some money without even thinking about it. You benefit in two ways: first, you save money. Secondly, even the smallest amount can snowball with interests. Six months of automatic savings will help you to weather any storm. Automatic transfer excludes any human weaknesses so you can’t forget to put some cash aside.
Set Financial Goals
Start with small financial goals. Let’s say your target is to put aside $50. The envisioned goal will help you stay motivated. You can gradually switch to big-ticket targets. Bear in mind that the emergency fund is not for entertainment purposes. Saving for a costly car or phone is good and will stimulate you to cut your other expenses to achieve the dream; nevertheless, the money you set aside for a rainy day will save you from many unanticipated problems.
What can help you relax more than an emergency fund built for four or five months’ worth of living expenses? There is no better time than now; start building your tough time fund right away!
