Strategies for Building and Growing Your Emergency Fund
Sometimes it takes going through a financial emergency to understand the vital importance of having an emergency fund on hand. Life is expensive. Sometimes things happen that are beyond the realm of your control, such as a roof repair, a mechanical problem with your car, an out-of-town funeral or any other expense that is outside of your regular, budgeted expenses. Having an emergency fund of at least $1,000 will help protect you from financial ruin in the case of unforeseen expenses popping up.
Eliminate as much debt as possible
It is unlikely that you will be able to afford to save much money if you are trying to pay down a lot of debt. Start saving as much as possible, regardless of how much debt you have, but also investigate ways you can get rid of some of your outstanding debt. Consider whether bankruptcy would be a good option for your situation. You might think that declaring bankruptcy means admitting failure, but it is actually a powerful tool for clearing away debt that you are just unable to handle and giving you a new start.
Set a savings goal
Let’s say your starting goal for an emergency fund is $1,000. Take a look at your budget and map out how long it might take for you to reach that goal. This will give you a clear picture and give you something to work towards. It will also serve as a reminder when you are thinking about splurging on a frivolous expense.
Cut back on unnecessary expenses
Look for those leaks in your budget, trim those unnecessary expenses and then add that amount to your savings each month.
Save bonuses and tax refunds
Although it’s not necessarily a good thing to be getting a large tax refund, if you are expecting one, put it in your savings account rather than spending it on something that will lose value. This sounds a bit drastic, but think about how much more peacefully you will sleep at night knowing you’ve got a solid financial cushion waiting for you in the bank should anything surprise you.
Get the whole family involved
When your family has grown accustomed to a particular lifestyle and level of spending, it can be shocking for them to get the news that it’s time to cut back on spending. Help them to understand why you are saving money and get them involved in finding ways to contribute.
- Put a change jar in the kitchen and encourage everyone in the household to empty their pockets and change purses of coins at the end of each day.
- Don’t eat out or go to the movies as often. Subscribe to a streaming movie service and save the money you would spend on a night out.
- Make it a fun game and celebrate when you reach your goals. Teaching kids the value of saving early will help them to save when they start earning an income, or even saving a bit of their allowance.
Reducing your consumer debt and building an emergency fund are just the first steps in establishing a firm financial foundation. You can discuss your finances with a bankruptcy attorney who will help you decide what your best options are.
If you’re dreaming of a debt-free future, bankruptcy can make your vision a reality. Contact DebtStoppers today to schedule a free personal debt consultation with one of our bankruptcy attorneys. Together, we can help you break free from your debt burden so you can move forward with your life.