When you're struggling just to pay the bills, the last thing on your mind is building an emergency fund. In
fact, nearly two-thirds of Americans have less than $1000 in savings.
But just because we're having trouble making ends meet doesn't mean fate
will pass us by. Washing machines break, car alternators fail, and pipes burst
whether you're struggling or not.
So how do you prepare for those inevitable moments of crisis? I asked some of the experts on Twitter.
Barbara Friedberg (@Barbfriedberg) advises people to make the hard choices. "It's worth it in the long run," she says. I completely agree. Of course you may have to sacrifice some of the things you like or have grown accustomed to, but having an emergency nest egg makes it worthwhile. Her final bit of advice: Take it "Bit by bit."
@Singlema suggests people take
advantage of the flush times in order to prepare for the lean periods. "In the
same way animals prepare for the winter, store up your reserves for when you
need them," she advises. This can be as simple as resisting the urge to spend
your income tax refund and instead placing it into savings. Bonuses, pay raises,
and financial gifts can also spruce up emergency
funds.
You don't have to create your
emergency fund all at once. Creating your emergency fund is a work in progress.
Saving even $20 or $30 a week allows you to slowly build a cushion of financial
security. Small simple changes matter. Consider these tips:
Learn to trim the
fat.
You may be struggling and
think you don't have the money, but ask yourself, have you really trimmed all
the fat?
I'm amazed when people
complain about the state of their finances but then I see them eating out at KFC
or McDonald's. Fast food is nearly two to three times as expensive as home
cooked meals.
Super-size your emergency fund instead by cooking at home. If you're pressed for time, cook several meals on Sunday and place them in the fridge or freezer for use during the week. This simple tip alone could easily save you $40 a week.
Likewise, take a close look
at the rest of your spending. Scrutinize it with a fine tooth
comb.
- Have you called around to negotiate a lower auto insurance rate?
- Are you utilizing all of your cell phone minutes? Could switch to a cheaper plan?
- Can you avoid the vending machines at work?
- How good have you been at consolidate trips to save on gas?
- Could you switch to a credit union to avoid high bank fees?
- Have you considered visiting the hair salon every three weeks instead of every two?
The truth of the matter is that once you scrutinize each and every expense, you'll discover ways to save that you never even considered before. Put the little "luxuries" on hold....
L. Marie Joseph, author of First Generation White Collar, frequently reminds people of the African Proverb: "Save your money and one day it will save you." When it comes to building an emergency fund no truer words were ever spoken.
Your turn... How do you save for
emergencies when times are tough? Share your comments below.
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