Don’t Get Caught Without It

31 Jan

Working at a credit union taught me a lot about money. I’ve always been pretty good with money, but there I saw many people’s mistakes and learned how to avoid them. One of the things I saw a bunch of times was people who had $0 in their saving accounts. Even a minor emergency could set them back for months, because they failed to prepare. Life can take you for an unexpected at any time. Illness, injuries, job loss, and relationship problems are all reasons to have an emergency fund.

You may say, “that’ll never happen to me.” And hopefully, nothing bad ever does happen to you. But the reality is emergencies are never planned. Life might be amazing for you right now, but that won’t stop an unexpected expense from popping up.

Bottom line – we all need emergency funds. Money expert Michelle Singletary recommends having a bare minimum of 3 months of your salary set aside. Having a year of your salary saved is even better. That takes A LOT of time to build, but it’s worth it.

So, how can you save that much? Here are 5 things I did to start my emergency saving account:

  1. Set small goals. Saying you need a year’s worth of your salary saved is too large of a goal to start with. It’s actually pretty overwhelming to think of saving that much. I began by identifying how much my average pay check was. Then, I made that goal #1. Once I hit that goal, I kept going. I’m nowhere close to a year of pay set aside, but slowly but surely, I’m getting there. Even Suze Orman knows it may take years to save this much. But you’ll never get there if you don’t start.
  2. Treat savings like a bill. Make it so saving money isn’t even an option. Figure out what you can cut out of your current spending, and put that money into your savings account.
  3. Out of sight, out of mind.  Your emergency fund should be somewhere you can get to it in a real emergency, but not in a fashion emergency. So, take it out of the bank where you do your regular spending & bill pay. If you can, have your job deduct it out of your paycheck and direct deposited somewhere else. Eventually, you may forget about the money, until you need it. Use an online tool to find a savings account that has high interest (this way your savings will make you money, too).
  4. Unexpected money isn’t yours. It belongs to your savings account. If you aren’t using your tax return to pay a bill, then it needs to go to your savings. And, as tempting as it may be to spend your work bonus on yourself, the majority of the money needs to go to savings. You’ll thank yourself in the long run.
  5. Don’t Quit. If you must take a break from savings, hop back on the horse quickly. Using your emergency funds for an emergency, is fine. But work quickly to replace the money you took out.

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