Life is full of unexpected events and changes. You never know when the unexpected can happen. There are those that can derail your financial stability such as unexpected job loss, medical bill, surprise household repair, or as simple as lost phone. That’s absolutely why everyone needs to prepare a fund for the unexpected.
An emergency fund is one of the foundations of a stable financial plan. It is simply a reserve you can tap when the unforeseen situation happens. It is best to keep it in a bank savings account which you have access when you need it the most. It is important to have because it gives you a financial cushion and it helps you not go into debt or loan.
Now, the rule of thumb in building an emergency fund is to set aside at least three to six months’ worth of expenses. It is not that easy to build, I get it, especially if you support a family, have a small salary but plenty of other expenses to manage. You can always start small. What matters is you start whatever your current income. To help you out, I have listed here 10 tips on how you can build your emergency fund fast.
1. Set aside a certain % of your income
Start saving 8-10% of your income each month before you spend any. . Or if you are not a fan of percentages, you can decide on a certain amount to save each month instead. Treat it like a bill/expense. This helps you develop in yourself- the habit to save money every time you get your paycheck. To make this process easier for you, you can set up an automatic transfer from your payroll account to your emergency savings account each time you receive your salary.
2. Get a second job
If it permits your time and you’re okay with pulling extra hours, you can get a second job that can supplement your income. A second job will not only bring in some extra money for you to build your emergency fund, but it can also bolster your resume, and provide a means to transition to a new career or a way to purse your passion.
There are many different jobs that could serve as a good second job for you. You can do traditional part-time employment, or work online.
3. Double-time the over time
If your primary job has opportunities for overtime, use them strategically to build your emergency fund. Keep track of your OT hours and transfer that whole amount to your emergency savings account each pay period. When you hit your goal, you may of course, phase out the overtime.
4. Sell Stuff
Almost everybody has a lot of extra stuffs in their life. Look around your bedroom or your house and you’ll be amazed at how many items you could convert to cash. Make extra money fast by selling your pre-loved clothes or bags and unwanted clutter. You can easily do a garage sale or sell it online to your friends thru Facebook.
5. Sell Your Gold
One specific thing you can sell is your old gold jewelry. Perhaps you have single earrings, some old gold chains and other broken or outdated jewelry that you don’t know what do to with. You can sell that jewelry for the value of the gold. You can research online to find the buyers of scrap gold or other precious metals and get that nice chunk of money.
6. Stop eating out for a while
Eating out is more fun and convenient but it costs 4x more than eating a home-cooked meal. Breaking the fast food habit is one of the easiest ways to cut costs and save more. Of course you don’t have to stop eating out forever, but it’s well worth the sacrifice if it’s for your emergency fund. In addition to saving money, you may experience health benefits since you can choose healthier options to eat at home.
7. Skip the coffee shop
Your morning coffee might seem like a necessity, but it might be time to say good bye to the expensive latte and hello to the humble homemade coffee. The 160-200 pesos you spend on drinks at the coffee shop every day adds up, and these funds would be better delegated to an emergency account.
8. Start doing a budget
Track your expenses, make cuts and create a budget. Budgeting not only helps you get control of your cash flow,it let’s you see where you may be wasting money. Get My Wise Spending Tracker for a free spreadsheet to help you review where your money goals and start creating a budget.
9. Collect Loose Coins
Those coins and centavos trapped in your couch cushions and pockets are worth something. Every little bit of money helps you build your emergency fund fast. Save it in a jar or a piggy bank and after some time, you may deposit it to your bank account and start all over again.
10. Deposit your bonus
Resist the urge to celebrate your Christmas or performance bonus by spending it. Instead, transfer that amount into your savings account to quickly catch up or build your emergency fund from zero.
By doing all or any of these tips, setting a timeline and a savings goal, you will be able to build an emergency fund fast. Once you build your full emergency fund, you can rest a little easier knowing that you are prepared and on track for financial success.