Do you need to know some ways to build up an emergency fund? An emergency fund is absolutely essential if you are to be secure; it helps you avoid getting into financial difficulties when something goes wrong. Anyone can hit problems such as your car needing repairs or a medical bill, and without an emergency fund to tide you over, you can end up in real difficulties. So here are some ways to build up an emergency fund …
1. Reduce Spending
One of the best ways to build up an emergency fund quickly is to cut down your spending. Look at how you can cut back on non-essentials; you'll probably find that you're spending quite a bit of money over a month on things that you definitely don't need. Put that money in a savings account for emergencies, and within six months you'll have quite a sizeable amount.
2. Bonus Money
Do you get any bonuses at work? This is an easy way to boost your emergency fund. You manage to get by without your bonus normally, so you won't miss it if it goes straight into your emergency fund. It's also a good place to put any money you're given for your birthday or Christmas; this may not be as much fun as treating yourself, but once you've built up your fund you can always spend future gifts on yourself.
3. Second Job
Do you have time to get a second job or set up a small business selling on eBay or Etsy? This would be a good way to boost your emergency fund. As with the bonuses, if your main job more than covers your needs, then you can put any profits straight into your emergency savings.
4. Direct Debit
Psychology can be just as important in building up your fund. Making it easy for yourself to save will help a lot, so start by setting up a direct debit from your current account to your emergency account. That way you'll get used to the money going out every month as a routine expenditure, and you won't be tempted to spend it on frivolous things.
5. Start Small
If you're finding it difficult to get into the savings habit, start with a small goal. You could begin by aiming to save $500, then once you've done that, increase your savings goal and go for $1000 or $2000.
6. Don't Touch It
It goes without saying that an emergency fund should be just that - and a new bag or shoes is not an emergency. Nor is a holiday. These things may be more fun than saving for medical emergencies or job loss, but an emergency fund will buy you something very valuable - peace of mind.
7. Sell Unwanted Items
Finally, hunt around your house to find things that you can sell. You probably have loads of clothes you never wear or things that you have hardly used. Liquidate them and make yourself back some cash, which should go straight into your emergency fund.
An emergency fund is something that everyone should have, so if you haven't yet started one it's time to do so. Aim to eventually have three months living cost as a minimum. Have you ever been hit with an emergency, but had no cash to get you through?