5 Tips for Building Your Emergency Fund
2016 is here and what better way to start off a new year than setting yourself up for financial success. I find one of the most difficult goals to keep intact is building and keeping an emergency fund. If you are like me you know you need to have an emergency fund, but achieving this goal is usually harder than you realize.
Here are five tips to help you succeed financially in 2016.
1. Have a Goal: Make sure you have a specific goal in mind, this helps to make your goal manageable. The rule of thumb for your emergency fund is enough money to cover four to seven months of expenses. If that goal seems daunting break your goal down into a few hundred at a time and you’ll be surprised how quickly things add up!
2. Know Where You Will Keep Your Emergency Fund: I recommend keeping your funds in an account that is easily accessible if you need to get to the funds, but it also needs to be separate from your regular spending money. Creating a barrier will deter you from simply transferring funds when your spending money runs low.
3. Pay Yourself Every Month: Building your emergency fund can be difficult, but if you treat it like a bill, it will become a habit. It’s important to pay yourself each month and chances are you won’t miss that money if you directly deposit it into your account from your paycheck.
4. Use It For Emergencies Only: I think this is the most difficult tip to follow long-term. You start out with good intentions for building your emergency fund, but it only lasts a few months. Keep in mind that emergencies include getting laid off, medical emergency or unexpected expenses.
5. Take Small Steps: Your emergency fund is not going to grow overnight, so it’s important to take small steps to achieve your larger goal. If you can only contribute $10 a week at the end of the year you’ll have roughly $500, which is still a good start to an emergency fund.
I hope these tips are helpful and keep you motivated towards achieving your larger savings goals. If you are looking to save more in 2016, take a look at a 52-week Savings Challenge!
Good Luck, Rachel
