Far too often, people find themselves living from paycheck to paycheck. Unfortunately, in many cases, due to some sort of unexpected circumstance, that sort of relationship with money means individuals may find themselves in emergency situations with no perceived way out.
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Although some short-term loans may be available depending on a person’s credit history and needs, there’s a better solution than scrounging around for financial resources once things have become dire. Starting and maintaining an emergency fund is an excellent way to improve your overall financial stability and help you feel more secure when things take a turn for the worst as far as your finances go.
Is It Really Necessary To Save For Emergencies?
Some people question whether having an emergency fund is really a priority. They may assert that having an emergency fund is similar to having a voluntary insurance policy, but never needing to take out a claim. However, having money you can rely upon during unexpected hardships is a practical way to remove at least one of the burdens you face when life gets tough. Consider that there’s almost no one in the world who can truthfully say he or she has never had any challenges to deal with in life.
Health problems, job layoffs and vehicle breakdowns are just a few challenges that can crop up with little or no warning. For many people who cope with life’s challenges, it can feel like smooth sailing during one day, and then akin to a ferocious hurricane less than 24 hours later. Because of that reality, most individuals are able to see that there’s genuine value in putting aside money for an emergency fund. They believe it’s not if something difficult happens, but when, and want to be prepared for whatever arises.
Examine Your Budget
The first step in saving for an emergency fund involves figuring out how much money you realistically spend on a regular basis. Your expenses might include housing, utilities, food, childcare and health needs, not to mention a little extra for fun things. Once you have a clear idea of your spending habits, it will be easier to see where you can cut unnecessary spending and put the money saved into your emergency fund.
Save A Little At A Time
Contributing to an emergency fund can seem overwhelming if you try to save too much at once and make yourself feel deprived. Rather than taking that approach, decide to set aside a modest amount, such as $10 per week, for your emergency fund. Doing that allows you to make good progress without having to make drastic changes.
Put Things Into Perspective
Some people also feel hesitant about contributing to their emergency funds if they are under the impression they’re so strapped for cash that saving any of it truly isn’t feasible. Although some people really do have hardly enough to live on, let alone save for emergencies, putting money aside is usually a realistic goal for most people. To go about shifting your perspective, think about how much small, non-essential things you buy can really add up quickly. For example, if you buy five specialty coffee drinks per week, they could total an expense of 25 dollars or more per week, depending on where you buy them and what size you get. Try making a small change, such as only buying two of those drinks per week instead of five. That’s a relatively small change to make, but the amount you don’t spend on coffee could go into your emergency fund instead.
Set Up A Separate Account For Your Emergency Fund
Do you usually want to spend money as soon as you get it? If so, that can make it really hard to keep increasing the size of your emergency fund. However, try setting up a bank account that’s specifically for the emergency fund. Then, check to see if your employer can directly deposit part of your paycheck into it automatically. That helps you build up money in the account and you won’t ever have to feel like the money is burning a hole in your pocket, because you don’t get immediate access to it.