In most cases, experts will recommend that you keep a financial cushion of funds for 3-6 months of living expenses in an account that is accessible, but separate from the one that you use every day. This financial buffer can provide peace of mind and security in the event of an emergency such as the loss of a job or significant income source, major car or home repair, death in the family, etc. Understandably, however, this level of savings is not something that the majority of Americans typically have at the ready. For many of us, it can be more helpfully viewed as a major savings goal for financial well-being. To jumpstart your savings and foster greater financial health, try integrating some of these proven strategies for creating your rainy-day fund:
Don’t worry about starting small, and set monthly goals: On the face of it, socking away savings for six months-worth of expenses can seem like a major reach for many people, which can make it difficult to develop the confidence that leads to success. But if you think in terms of small, shorter-term goals, saving becomes more manageable, and you can set yourself up for better results. For instance, you might start by saving $50 one month, $60 the next month, and then increasing the goal by small increments in the following months. Looking for more encouragement? NerdWallet assures us that even saving $500 can help you avoid a number of financial predicaments, and provide a foundation for building your savings over time.
Implement automatic savings: Setting up recurring monthly transfers to your savings account (or another secure financial product) allows you to grow your savings without having to make a painstaking and disciplined effort on a regular basis. What’s more, you’ll have a built-in system for avoiding the often-ineffectual practice of waiting until the end of the month to save. If you haven’t already, do yourself a favor and use direct deposit to divide your paycheck so that a portion of it goes into a savings vehicle, instead of putting the entire amount in your checking account. Self-employed or don’t have a workplace with direct deposit? Schedule automatic monthly transfers from your checking account to an emergency fund.
Explore one-time income possibilities: Whatever you think of Dave Ramsey’s personal philosophy and tough-love style, his three-minute read “4 Quick Ways to Build Your Emergency Fund” has some valuable advice on quick ways to make additional money both inside and outside your home. A few suggestions: participate in focus groups, complete online surveys and take care of pets when their owners are away from home (find opportunities at Rover). Seeking ways to earn extra cash on an ongoing basis? Entrepreneur magazine suggests finding opportunities in your particular area of expertise through freelance marketplaces and sites like TaskRabbit, Amazon Home Services, JustAnswer and Fivver.
Roll over your change, and/or collect it for later deposit: Don’t overlook the value of making your spare change work for you when it comes to boosting your savings. One way to do this is to drop your loose change and $1 and $5 bills into a jar after each day. At the end of the month, deposit all the money in the jar into your emergency fund. Another method, and one that works especially well for those who don’t carry much cash, is to save small amounts of money with convenient personal finance apps like Qapital, Digit and Acorns. Many of these apps work by rounding up your debit account transactions to the nearest dollar and transferring the money to a savings account. Some even let you set multiple savings goals based on rules you set yourself (e.g. transfer $20 to savings every time you order a pizza).
Take advantage of cash-back apps: If you’re a fan of cash-back apps like Rakuten (originally Ebates) or TopCashBack, consider redeeming your earnings with a direct deposit, check or transfer to your emergency account. Just be sure to restrict your use of cash-back apps to a specific purchase or store visit. Don’t browse stores or products idly, or you run the risk of spending more, and defeating your purpose. Find “16 Best Cash-Back Apps for 2019: Earn Money Every Time You Shop” at Remote Bliss.
Look to your recurring charges to trim expenses: Cutting out half of your meals out, making fewer visits to Starbucks and carpooling to work might be effective ways to save, but for some people, making these changes may not be entirely realistic, or might seem too much of a compromise on their quality of life. For an easier way to save without feeling deprived, check out your financial statements for monthly automatic withdrawals on services you don’t use, or won’t miss. For instance, subscriptions for magazines you no longer read, or gym memberships you don’t use because you prefer to workout at home or walk for exercise. It can also be a good idea to call to your internet and phone carriers to find out if they can offer you better rates, and/or consider switching from your cable provider to less pricey streaming services. Another area where people tend to overpay is their auto insurance premiums, so be sure that you shop around and take advantage of discounts to which you’re entitled. Check out The Balance for “Top Ways to Turn Your Current Car Insurance Into Cheap Insurance.”
Understand what an emergency savings account is, and what it isn’t: You’ll stay better focused toward successful results if you have a clear picture of what your emergency fund should accomplish, designate savings for this specific purpose and set realistic goals based on your current situation. As MoneyWise has explained, an emergency fund is meant to cover unexpected expenditures in a situation that hinders your ability to earn money, threatens someone’s health or creates an unstable home environment. Essentially, an emergency fund will help you avoid debilitating stress and major financial setbacks that might otherwise occur in these circumstances.
In their article “Emergency Fund: What It Is and Why It Matters” NerdWallet clarifies what emergency funds are not intended to cover: your vacation plans, holiday and birthday gifts, purchases to lift your mood, the chance to buy an item you don’t need at a bargain price, etc. It’s generally recommended that you create a separate savings account for these goals. Fortunately, online tools such as The Police Credit Union’s MoneyTrac give you an easy and secure way to manage all of your financial accounts in one centralized location, instead of logging on to multiple accounts at different websites. With real-time updates and color-coded visuals, MoneyTrac makes it simple to set various financial goals, track and monitor spending, maintain a budget, manage debt and more. Learn how easy it is to get started now at http://bit.ly/SFPCUMoneyTrac.