The following is a guest post by Jan Vespremi.
What mom wouldn’t jump at the opportunity to throw her budget out the window and shop till her heart’s content?
Unfortunately, we live in the real world, and in the real world, financially savvy people plan. This is exactly why we have budgets and emergency funds. Maybe you have the budgeting part down pack, but when it comes to an emergency fund, you could use a little help.
Saving money is by far one of the hardest things to do, especially if you don’t have a lot of disposable income to go around. You can always ignore saving and hope for the best, but sooner or later, a financial emergency will happen.
Understand that building an emergency fund does not require a huge salary – it can be as simple as adopting a few frugal habits and knowing how to maximize what you have.
1. Know your needs.
To keep your savings goal on target, decide how much you want to save. Of course, you can never have too much in an emergency fund, but with a target number in mind, there is something to work toward.
Financial experts differ on how much you need in an emergency fund, with some recommending a three-month cushion and others suggesting an eight-month cushion. In the end, your fund has to be an amount that you’re comfortable with.
2. Adjust how you spend.
Being frugal doesn’t mean a life of staying home and watching the walls. You can certainly go out and have fun. But if you’re looking to save, it’s all about choosing the right kind of fun – cheap fun, and then putting the savings in the bank.
You don’t have to spend all your extra cash to have a good time. Open the entertainment section of your newspaper and I bet you’ll find a bunch of upcoming free events. And if you can’t find anything, create your own fun. A family picnic, an afternoon in the park, a hike or a beach day won’t cost a dime – or cost very little.
But the savings don’t have to stop here. Whatever you do – whether eating or shopping – always be on the lookout for ways to save. For example, you can save a bundle when eating out by simply sharing an entree with your mate and ordering water. And if you join a retailer’s or restaurant’s mailing list, you can receive coupons and promotions in your inbox.
3. Take your savings to the next level.
A regular savings account is a good starting point, but it isn’t enough to grow your emergency fund. Once you’ve saved up some cash, talk to your bank about opening a CD. Rates for Certificate of Deposit accounts are considerably higher than regular savings accounts. Plus, the longer your money stays in the CD, the better your rate. Select an account that compounds interest daily and you’ll grow your emergency fund faster.
Your choices and habits ultimately decide if you’re able to create an emergency fund. Just because you’ve dodged a bullet thus far doesn’t mean you’re out the woods. It’s not a matter of “if” an emergency happens, but “when.”
About the author: Jan Vespremi is a freelance writer and blogger who most enjoys writing about the ways her family has been able to save money both inside and outside of the home.