Emergencies happen, regardless of how well prepared you are. If you have a bit of extra money saved, the emergency will be less stressful and easier to deal with. If you do not, you face having to come up with money at the last minute. Fortunately, there are some ways that you can save up for unexpected expenses.
Decide How Much
When you start saving, you should have an idea of how much you need to save. This begins with deciding how much you need. For someone with a steady income, six months of bills are sufficient. If your income is not steady, most experts recommend at least nine months, if not more.
This amount will not only cover you for emergencies, but it will also allow you to live comfortably if you lose your job, get laid off, or business is slow.
Make Saving a Habit
You can make saving money a habit. This is the most effective way to save emergency money for car repairs, large purchases, or other large expenses.
- Create a system – this can be immediately transferring money from your paycheck or using an automatic transfer program to add money into a savings account
- Set a goal – a clearly defined goal will help you stay on track. Start with smaller goals, and when you accomplish them, increase the goal gradually. Anything you save over that goal can be your reward or added to your new goal.
- Monitor yourself – just as you monitor your spending, you also should monitor your savings
- Celebrate when you are successful – When you reach your goal, treat yourself to something special. Remember, do not use the money that you saved but buy something small or treat yourself.
This is a great way to start saving money and works well for those not used to the process.
Be Aware of Your Cash Flow
Knowing when money is coming in and going out is extremely helpful for saving. This works well if you have a steady paycheck, even if you are living from week to week.
Use a spreadsheet or notepad to track how much money is coming in and how much is going out. This will show you opportunities to save or cut spending where you need to. It can also help you to decide when you want to pay bills to avoid being short.
Take Advantage of Bonuses
Most people get a bonus at least once a year in the form of their tax return. You might also get a bonus from work, Christmas or birthday money, or some other windfall.
Instead of spending this, save it for an emergency. This will help you build your emergency savings faster. Many people make the mistake of spending all of their extra money on one big purchase. Not saving at least some of it for an emergency is a mistake.
Saving is difficult, particularly when you have things that you want to spend your money on. Hopefully, these tips will help you get started.
Krishna Murthy is the senior publisher at Finance XOD. He is not only the senior publisher but also the owner of Tricky Finance. Krishna Murthy was one of the brilliant students during his college days. He completed his education in MBA (Master of Business Administration), and he is currently managing the all workload for sharing the best banking information over the internet. The main purpose of starting Tricky Finance is to provide all the precious information related to businesses and the banks to his readers.