Starting a dedicated emergency fund is one of the best ways to protect your finances and your family. Having money set aside for an emergency can help you to get back on your feet when the unexpected strikes.
Regardless of if that is a health emergency or an unplanned home improvement, you want to have this cash on hand to be able to avoid a financial catastrophe. Here are five ways to start building an emergency fund so that you can feel financial peace of mind.
The first step in setting up this fund is establishing your funding goal. This dollar amount largely depends on your personal situation. Larger families will inevitably need a larger emergency fund.
To determine this targeted goal, think about the type of unexpected expenses that you have had to deal with in the past. If you drive new cars, you should feel more confident that you will not need to deal with a surprise vehicle issue versus if you are driving a car that frequently needs repairs.
Likewise, homeowners will also likely need more cash reserves than renters. Having kids may also necessitate that you have a bigger emergency fund. Lastly, those with underlying health concerns may also need a more significant savings target.
Saving your money automatically is one of the best ways to stay consistent and meet your objectives. Many people find success by setting up recurring transfers through their bank.
Perhaps you want to set it up so that a certain amount of money goes directly from your paycheck into your emergency account? You will be less likely to even miss the money if you never see it.
Do not forget to increase this amount when you get raises at work. You do not have to designate the entire amount to go toward your savings. However, every little bit helps when you are working to build up this fund.
The most successful savers lean on the power of one-time financial payments to sock away money. For most Americans, this annual windfall comes with a tax refund.
While it may be tempting to spend that money on a vacation or new furniture for the home, you are better off putting the bulk of the money away for a rainy day.
Other good opportunities to put away a large chunk of cash include year-end work bonuses, holiday and birthday gifts, or inheritances.
This strategy is especially helpful for those that do not have a consistent income that they can count on. You will feel better about the state of your finances if you know that you have built an emergency fund using these extra payouts or gifts throughout the year.
Once you have made the decision to start an emergency fund, you will need to determine a system to monitor your progress. Regularly checking your account will provide motivation as you see the number getting larger each month.
You may also want to consider setting up automatic notifications to keep track of your account balance. This gratification will deliver much-needed encouragement while also helping you to determine if you are reaching the objectives that you need to feel secure.
You will feel more motivated to stick with your savings goals if you reward yourself for meeting your targets. Maybe you want to take a special weekend getaway once you reach your emergency fund goal?
The reward may also come in the form of making a much-needed home improvement. For example, if you know that your roof needs repaired or replaced, you will be more motivated to save knowing that this fund is going toward something important.
The professionals at Cenvar Roofing are the premier Lynchburg roofing experts that can help you to decide how to best use your money to ensure a solid roof. The key is to be able to find tangible ways to see how your emergency fund is making your life better.
You will never regret making the effort to set up an emergency fund. A tangible emergency saving is the foundation of building a solid nest egg, making it important to make this a habit now.