There are events in life that you do not foresee. When it happens, you do not have a plan in place to react and respond appropriately.
Often, people wound up needing a large sum to pay for major repairs or for utilities and medical bills. That is why you need an emergency fund, money you saved up for unexpected expenses.
Here are tips you need to follow to save up for an emergency fund.
Manage Your Debts
Sometimes, people accumulate debts from multiple lenders. They cannot set aside a portion of their monthly income because they are paying their mortgage on top of car title loans and credit card bills.
It will not be easy to save up for an emergency fund if you are still paying off your debts. If you are struggling, you should try and find ways to speed up the repayment process. Look into debt consolidation, for example, to immediately pay off debts, especially the ones that have high-interest rates like credit cards.
Get Rid of Unnecessary Expenses
There are expenses that you need in order to survive and go through your day-to-day routines. These expenses include utility (water, electricity, internet, and gas), rent, and food. There are also expenses that you honestly could live without. These expenses include your to-go coffee, restaurant takeouts, clothes, etc.
Make it a habit to take note of where your money goes every day, every week, and every month. It would help you point out expenses that are not necessary and, therefore, you can either get rid off them completely or hold off for at least a few months. It might help you realign your goals and stop spending money on things that you want but do not need.
For example, you may realize that you have been making a lot of online purchases for the past couple of months. You can nip the bad habit off the bud before it becomes a bigger problem.
Get Rid of Old Stuff
If you are like a regular American, you own a lot of stuff that you no longer use or need. It is time to get rid of all those items and earn money along the way.
There are plenty of ways you can clean your house and sell items that have been lying around inside your house. You can post pre-loved clothing on apps like Poshmark, Depop, and ThredUp. For electronics, you check out take-back programs by Amazon, Apple, and other manufacturers. Other pieces of furniture that are still in good condition can be sold through eBay, Craigslist, Facebook Marketplace.
These things only take up space in your home. It might have a better life in another person’s home.
If your monthly income cannot cover your emergency fund, then you need to start earning more money.
You do not have to apply for another job. You can spend your free time after work or during the weekends freelancing. Do you have a knack for writing blog posts? Can you create a website? Do you have a car that you can drive around the city? You can make money off of your skills. Sign up to platforms such as Skillshare, Upwork, Fiverr, or even Craigslist to find clients who are willing to pay you to do tasks for a limited time.
An emergency fund should be able to cover at least three to six months of your basic living expenses. Saving up will not be easy for everyone, but having an emergency fund will assure you that you have money to spend when you need it the most.