Talk about setting good goals.
- An emergency fund could help you avoid debt in the event of job loss or unplanned bills.
- You should aim to sock away enough money to cover three to six months of living costs.
The pandemic has changed a lot of people’s financial behavior, and the events of the past couple of years have helped many people realize the importance of having money in the bank.
In fact, a recent Fidelity survey reveals that Americans’ spending habits have changed since the start of the outbreak.
Now, 65% of Americans are prioritizing their emergency funds. That’s a good thing, because having money in a savings account could prevent a world of trouble in the event of job loss or unplanned bills.
Ideally, your emergency fund should contain enough money to cover three to six months of essential expenses. If you’re not there yet, here are some tips for boosting your cash reserves.
1. Rethink your near-term spending
Many of us have monthly expenses that really aren’t needs — they’re wants. When you’re in great shape savings-wise, there’s no need to stop spending on wants. But if you don’t have emergency savings, or don’t have a complete emergency fund, then it’s a good idea to cut back on non-essentials until you’ve finished building that safety net.
Take a look at the things you currently spend money on and see where there’s room to cut back. And then, commit to making some reasonable changes that free up cash.
That could mean dining out once a week if you generally do so twice a week. Or, it could mean replacing your cable plan with a lower-cost streaming service for six months if doing so will free up a few hundred dollars for you to put in the bank.
2. Bank your windfalls
If you recently submitted a tax return, you may have a sizable refund coming your way. Or, you may come into extra money at different points of the year, such as if you’re gifted cash for your birthday or during the holidays. If your emergency fund needs work, one of the easiest ways to boost your cash reserves is to sock that extra cash away rather than spend it — tempting as it may be to do the latter.
3. Get a side gig
You may only have so many expenses you’re able or willing to cut back on. If that’s the case and you’re far from having enough money in savings to cover three months of living expenses, then it may be time to consider getting a second job on top of your main one.
That side hustle isn’t something you have to commit to forever, though. Rather, you can do it for a few months or a year if that’s what it takes to meet your savings goal.
Best of all, there are many side hustles that allow you to work when it’s convenient for you. If you don’t have a lot of time in your schedule, aim for a gig where you can set your own hours and work more or less from one week to the next.
If you don’t have adequate funds in savings, your next financial emergency could land you in serious debt. Do your best to build an emergency fund quickly so you’re protected from that unwanted fate.
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