Posted by: Discover Directory on 12/19/2018

How to Grow Your Emergency Fund

How to Grow Your Emergency Fund

Having an emergency fund can be as simple as taking a chunk out of your check or transferring money from your checking account every other week. According to the Personal Finance subcategory on CNBC, almost 10% of Americans making at least $100,000 and 78% of “full-time workers” live their lives paycheck to paycheck or cannot make ends meet. The same source states that 56% of Americans save only $100 or less per month. 

Based on these statistics, it is obvious that many people struggle to save money even if they really need and want to. Try these tips to limit your spending and grow your emergency fund:

  • Break down your daily spendings. 

For a determined amount of time — say, a week — sit down at the end of the day and make a list of everything you spent money on that day. This will lay out your spending habits. It will also show you any unnecessary costs you might be able to eliminate. 

  • Add up your monthly expenses. 

At the end up every month, take a minute to add up all your expenses. Then, compare that total with your monthly income. If your income is higher than your expenses, transfer that surplus into a savings account. You could use it for something fun, but you’ll thank yourself for the extra cushioning when you need it. 

  • Have a realistic goal.  

It’s impractical to set a practical goal without first taking a glance over your current monetary situation. So, after you have tallied up all spendings and expenses, determine how much you would like to have saved by when. Be sure to keep the goal realistic. If you’re living paycheck to paycheck, then you’re likely not going to have $500 saved in two weeks. Working towards an outlandish goal and not being able to reach it is only going to dismay you (even though the goal was unlikely to begin with) — having a realistic goal will keep you organized and motivated.

If you’re at a loss for what a realistic savings plan looks like, a bank will help you design a strategy that works best for you and will maximize your savings. 

  • Keep your savings separate. 

Allowing your savings and your checkings to mingle in the same account is a recipe for disaster. Even if you’re not constantly tempted to spend it, you might do so without realizing. Keep your emergency fund in a separate account. Many online bankers have multiple types of savings accounts, so you can choose the savings account that best meets your goals. 

  • Be frugal.

Take the list you made from the first bullet and give it a good look. Is there anything that was unnecessary on that list? Have you gone out for coffee every day this week? Take futile spendings like these and cut them out. If you’re a smoker, cut down to a pack a week or quit altogether. Make coffee and lunch at home, and bring them to work. See if there are any subscriptions you have you can live without — there are even services that will do this for you. Take the money you would normally use for these indulgences and stick it in your savings account. 

Building up your emergency fund isn’t exactly easy but it’s definitely a necessity. There will likely be a time in which you were thankful you had one — if your air conditioning died in the middle of summer, for example. Even if you’re living paycheck to paycheck, utilizing simple savings tactics such as these will have you meeting your goal with little strain on your wallet.