Published On: Tue, May 16th, 2017

The Stress-Free Method to Saving for Emergencies

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Could you part with $1500 right now if you needed to? If you drive, any one of a number of critical components can go out on you. What if you needed to find a new place to live in 30 days? Whether it’s a visit to the mechanic, the doctor or a new apartment, most Americans just don’t have that kind of cash on hand. For those that fit that mold, it’s a surprisingly small amount of money to feel more financially secure. If you were to break that down into installment loans, that’s a principle of about $120-$150 each month.

If you’re stuck in the lack-of-savings trap, then you’ll be glad to know there are a few time-tested ways to get yourself out of debt and on track to developing an emergency fund.

Determine Your Amount

Between oil changes, tires and other basic maintenance, you might be looking at as much as $125 each month going toward the upkeep of your car. Figuring out how to save that amount of money is a good place to start when it comes to finding your magic number. Anticipate your disaster. Is it losing a job? Natural disaster? What could occur that might force you to miss work for a significant period of time? Now, imagine the worst case scenario for that situation and you should be getting closer to putting a dollar figure on that emergency fund.

One good concept to keep in mind is that a well-developed emergency fund covers expenses, not income. You’re off to a great start once you cross the $1,000 threshold.

Stop Letting Late Fees Kill You

Figure out what you can pay on time, and pay that. Start by documenting what companies you pay on a monthly recurring basis. This might also be a good time to make some cuts in your monthly budget, but we’re assuming you’re past that point. One method of avoiding late fees is to consolidate your bills into one account. The best method for this is to maintain a checking account, and have payments deducted directly. The “also good, but still risky” method is to put your bills onto a credit card and pay that bill. The danger with a credit card strategy is interest and late fees, which can start to hurt if your balance gets out of control.

Make Money Harder to Access

Online banks offer an excellent perk they never talk about (and, in fact, some might rather hide). It sometimes takes longer to get a transfer or pay a bill when you bank exclusively online. Though the logic seems counter-intuitive, it helps you avoid snap decisions that lead to poor spending habits. The more responsible you are with your money, the better your chances of developing an emergency fund.

Keep a Change Jar

In a few years, you could be saving $50-100 in spare change. That’s basically interest on a savings account at a brick and mortar bank.

Remember One Thing

The lack of an emergency fund does not mean you are headed toward certain financial disaster. The reality of the American economy is that employment is strong for many job sectors, and employment insurance helps to cover the lost wages of immediately unemployed workers. Avoid falling into the pitfalls that come with chronic debt, but there already exist some safety nets that will help you in the immediacy of sudden unemployment.

Final Thoughts

Remember that saving should ease stress, not add to it. Pay your debts, focus on saving with very specific goals in mind, and you’ll be able to build up an emergency fund and feel more financially secure.