Do you have an emergency fund? Are you able to handle if an unexpected expense, like a broken down car or a hefty medical bill pops up? If the answer is no or uncertain, it may be time to start setting up an emergency fund.
An emergency fund is money you set aside, typically in a separate bank account that is strictly for emergencies. So if you get handed something like a broken car or a big medical bill, you can afford it. This money should also be readily accessible. Since an emergency usually means it needs to be dealt with right away, having quick access to those funds is essential.
So to help you get your emergency fund started, here are a few tips to get you going.
How Much Should I Have?
It’s hard to pinpoint precisely how much you should have in your emergency fund as it depends on your financial situation. Obviously, you do not want to put yourself into debt by setting up an emergency fund. However, you should have enough to cover a bill that would be several hundred dollars.
A general idea as to how much you should have in an emergency fund is enough to last you six months of living if you lost your job. Losing a job would be considered an emergency. So your fund should be able to help support you until you find another source of employment. Start setting aside money right away, even if it is just small amounts.
How Do I Start?
Have a goal in mind as to how much you want in your account. It can be a good idea to set up small goals throughout the year to help keep you on track. Say you want to have $1,200 by the end of the year. Your smaller goal could be depositing $100 a month to your emergency fund.
Budgeting also will help with this. By setting up a budget, you see where your money is going and how you can make cuts to supply your emergency fund.
Find Ways to Add Money
You want your emergency fund to grow, so you need to be adding money to it regularly. If you find you do not have enough disposable income after your expenses to set aside, consider finding more ways to bring in money. Another job or selling some items might be the answer.
Also, start saving the small bills and change. When you break a large bill, take the small bills and set them aside. Once you have a large amount, deposit it into your emergency fund. You could also use your annual tax refund to put towards your emergency fund.
What If I Don’t Have Enough?
If you find yourself in a tight situation where you have a massive bill, and your emergency fund isn’t quite there, don’t panic. Some companies can help get you quick money to cover these expenses. Consider short-term loans to get you fast cash to cover the emergency. Remember though, you will have to pay it back relatively quickly.