There are many things that can rock the boat of your financial security. But you won’t need to worry about the unexpected expenses if you have an emergency fund to fall back on. These seven steps will help you get started:
1. Decide how much you want to save.
There are differing opinions about how much should be put into an emergency fund. Some say $1,000 and others say three to six month’s living expenses. Decide which plan is best for you by asking yourself how much you need to have saved in order to feel secure.
2. Calculate monthly expenses.
Write down all of your monthly expenses such as housing, insurance, food, utilities, loan payments, etc. Add up your monthly expenses and multiply the result by the number of months’ expenses you want to have saved.
3. Start an account.
When you know how much you need to save, decide where to keep your money. Your emergency fund should be fairly accessible so savings accounts, money market accounts or short-term CDs work best. All of these accounts will offer you liquidity while earning interest at the same time.
4. Decide how much you can save.
Building an emergency fund is a marathon, not a sprint. It will take time! Look over your finances and figure out how much you can afford to save each month.
5. Set up automatic deposits.
Scheduling automatic deposits into your emergency fund makes it easier to save because you don’t need to debate the amount each month.
6. Look for ways to boost savings.
When you find creative ways to save money, you will be able to contribute more to your emergency fund and reach your goal faster. Talk to an expert at Raccoon Valley Bank or check out some of our previous blog posts for ways you can save some extra cash!