5 Ways to Bulk Up Your Emergency Fund

November 22 14:03 2018 Print This Article

One of the most important components of personal finance is your emergency fund. This is your savings reserved for sudden life occurrences that can cost a lot of money such as getting sick or your car breaking down and needing major repair work.

Surveys reveal that despite the importance of an emergency fund, a lot of people – particularly those in the middle class – do not have it. The typical amount of money needed to cover for a single emergency situation, which financial experts estimate to be around 400 USD or 1,500 AED, is just nowhere to be found in the finances of folks who actually have a stable job.

The excuse that most people have is that they live from paycheck to paycheck, and there is simply no room in their take-home pay for savings.

Be that as it may, it is imperative to start creating an emergency fund because, in the event of a job loss, illness, accident, and some other costly occurrence, not having an emergency fund can spawn other problems.

But if you find your finances are already stretched too thin, how can you manage to create or bulk up your emergency fund? Here are five ways that may help:

1. Downsize your life even more.

Creating an emergency fund requires some sacrifices for a specific period of time. Find areas of your life that you can cut down on and save money.

For example, you can adjust your diet. If you still have money for occasional dine-outs, consider upholding a “no dining out” rule for about six months. Eat only what you purchase from the grocer and stretch your food budget as much as you can without sacrificing nutrition.

Another downsizing idea to consider is to avoid any kind of treat that costs money such as drinking colas or sodas or even going to the movies weekly or once a month.

Remember, the sacrifice is just for a certain period of time. Once you have saved a good amount for your emergency fund, you can slowly ease back into a more comfortable lifestyle.

2. Always pay your bills and loans on time.

It is crucial to prevent yourself from paying more than you need to. Avoid paying extra charges and interests due to delayed payments. Make sure that you are on top of the schedule of payments especially for personal loans.

3. Use a cash back credit card.

Make sure that your credit card is a tool that can help you manage your finances the best way you can. It is vital to note that credit cards are not created the same. Some perform a much better job at helping you stay on top of your money responsibilities better such as a cash back credit card.

Essentially a cash back credit card gives you “free money” or some other form of financial reward for the usual money activities you already cover with the card, such as paying your bills. The cash back you get may allow you to set aside a bit more money for your emergency fund.

4. Make it mandatory to save for your emergency fund.

You must treat your emergency fund as an absolute must. Set aside money for it as if it were one of your bills to pay. This strategy will help ensure that you are always directing money into it.

Also, any time that you get extra money, say, relatives gave you money, or you got a bonus at work, take a portion of that extra money and put it directly into your emergency fund.

5. Find extra sources of revenue.

If you still have some free time within the week, use that for generating additional income. Take paid online surveys or look for a temporary side hustles such as babysitting or pet sitting.

Basically, grab whatever income opportunity you can to increase positive cash flow into your life

There’s nothing like being prepared

It is clearly not easy to create an emergency fund but you should not do without it simply because it is difficult.

Just remind yourself that the hardship behind accomplishing this financial initiative cannot compare to the great assurance that, should the unexpected happen in the future, you have it covered and will not end up in financial ruin simply because of it.

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Clare Louise
Clare Louise

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