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If you’ve been reading about personal finance then most likely you’ve heard about emergency fund. If for some reason you have not heard it before, head over to Emergency Fund For Beginners to learn more. After learning about emergency fund, come back and learn how to save for emergency fund.
It’s just a matter of time before it happens. The transmission blows on your car right around the time your daughter needs braces, and your washing machine decides to call it quits. All of these are unexpected expenses and something we need to deal with throughout life. As they always say, life happens.
Being prepared as much as you can is your best bet when life throws you a financial curveball.
An even better strategy is to have an emergency savings fund. Set up a savings account and add to it monthly. Use it only for completely unexpected expenses. Make sure you know what’s in the account. And once you have to take money out of it replace it as quickly as possible.
How To Save For An Emergency Fund
Reevaluate Your Budget
If you do not have a budget, create one. If you don’t know how, head over to How To Create A Family Budget. If you already have one, go over it and adjust accordingly.
Cut Back On Your Expenses
When you have a budget, most often than not you can find ways on how to reduce your expenses. Stop ordering pizza every Friday night and make your own at home. Skip a night out on the town and watch a couple of movies on Netflix instead of going to the theatre. Use Trim to reduce your utility bills.
Find Ways To Save
Int this day and age, there are a lot of ways to save some cash on almost every daily expenses. When grocery shopping, you can use an app called Ibotta to get some cashback. And when you do a lot of shopping online, you can use an app called Rakuten.
For an extra boost, work a few hours of overtime. You can also ask your boss for some other opportunities for overtime. A little extra will build up your emergency fund faster.
Pick Up A Side Hustle
Do a few freelance projects or temporarily pick up a part-time job to fast track your emergency fund. There are a lot of side hustles out there that are available. You can drive for Uber or Lyft. You can even do deliveries. If you are quite a handyman, sign up for TaskRabbit. Starting a home-based business can also be a good source of extra income, here are some good ideas.
Can you make do without the item for a little while? Just long enough to scrape together the funds to repair or replace it. If it’s the dishwasher, that’s easy. You can wash dishes by hand for a little while. If it’s the fridge or the car you rely on to get you to work each day, that’s a different story.
Do your best to anticipate upcoming expenses. If you’re driving an older car, or your dishwasher has seen its better days, start saving up to replace the item. You may also want to start keeping an eye out for good deals on the replacement.
Important Things To Consider
What to do when the expense comes up before you had a chance to set up the emergency fund?
Take a deep breath and assess the situation.
If you need the item that broke, evaluate if it would be less expensive to repair than replace. Even if it isn’t the perfect solution, it may get you to work until you can save up for a different car.
Shuffle your money around and if there is no other option charge it to the credit card and get to work. Your one and only goal right now is to pay off that expense. If you stick every penny of discretional income in, it won’t take you long.
How to recover quickly after that purchase.
Go over your budget (you have one of those, right?) and look if you can temporarily cut back on some things. Use the money you’re not spending for the next few months to refill your emergency fund.
Once your bills and credit cards are paid off, do what you can to save for emergency fund. Because you know something else will break down the road.