An emergency fund is an important step in your debt-free journey. Find out why an emergency fund matters and how to start one today.
When you’re trying to pay off debts, an emergency fund might not seem like a big deal. Yet, a lot of experts recommend them. It may seem counterproductive, but there’s a good reason.
Life is full of unexpected events. That may be one of the reasons a person finds themselves in debt in the first place.
No one can plan for a car breaking down or a hospital visit. Not a lot of people have the extra money to pay these unexpected costs either. This can lead people into debt.
So, be prepared and start one.
Before figuring out how to start one, let’s figure out how much you should save.
When you first start your debt-free journey, a good starting point is to save $1000. That is a safe amount that will protect you from the unexpected, but crucial moments. When you’re able to save more, a great goal is to save a 3 to 6-month fund.
Now that you have a goal of $1000 or more to save for your emergency fund, it’s time to plan. When you make a budget, you’ll be able to allocate money to this fund.
If you can’t budget more, but still need extra money, there are a few things you can do.
First, sell some of your unwanted items. Sometimes it’s easy to acquire a lot of things. When you get sick of the clutter, try selling them online or at a garage sale. There are great apps and ways to sell online that is safe for both the buyer and seller.
Second, get an extra job. Although you may work long hours, getting an extra job can help start an emergency fund and pay off excess debt.
Ultimately, find out what works best for you! Do DIY hacks to keep your homes’ heating and cooling costs low. Take your budget for eating out and put it in the savings fund. No matter what, any small thing will make a huge difference.
Next week, we’ll talk about fighting the urge to spend money!