Financial advisors state that having an emergency fund equivalent to at least 3 months’ worth of your expenses is necessary for your financial stability. With it, you will have financial support if something unplanned happens. In order to build your own emergency fund you need to either reduce expenses or increase earnings. The next 10 ways to build one are a great guideline to follow if you have never had one – or have had a hard time saving for one in the past.
1. Get a Second Job
Having a second job is a sacrifice indeed. However, knowing that this won’t be permanent provides substantial relief. There are so many possibilities out there including freelancing or just babysitting. Either having a part-time job or working from home for a few months will provide you with the cash you need to build your emergency fund very quickly.
2. Don’t Eat Outside Too Often
Eating outside is a sure-fire way to ran out of funds before the end of the month comes. According to the Daily Mail the average UK citizen spends £1,320 in takeaways a year. For people aged 25-34 this number jumps to £2,626. Cutting these expenses by half will allow you to save anywhere from £650-1,300 a year which is just enough to boost your emergency fund as needed.
3. Get Rid of Bad (and Costly) Habits
Every penny saved accumulates to a great sum. Most of us have some habit or another. Whether it’s smoking, alcohol, eating candy, and even drinking coffee, money spent on a regular basis will add up to staggering amounts. Thus, reducing these habits little by little will improve both your health and your emergency fund.
4. Sell Stuff You Don’t Need
Through the years we have accumulated lots of stuff that we may not be currently using and probably never will. Whether it’s a TV, a desk, a smartphone, etc. you can put it on sale over the internet. Not only will you have more cash for you fund but you will also have more free space at home.
5. Rent a Room
With sites such as Airbnb, you can feel safe when renting a home to a tourist for a few days. Just upload pictures of your home and post them on the site for extra earnings. You can also post a classified in the local newspaper. Anyhow, this requires little effort and will provide you with a good source of income.
6. Become a Negotiator
Expert negotiators always state that everything is negotiable. While this is true, you don’t want to waste your time bargaining a piece of candy. Rather, focus on the items that are not that cheap. You can learn negotiation skills through books or online resources. The good thing is you can also renegotiate things such as insurance premiums, interest rates, and cable TV among others. It will soon become a habit and you will be able to build your emergency fund faster than expected.
7. Track Your Spending
Having a spending book or downloading a suitable app for this purpose is one of the best things you can do to save money. For an entire month you should track every pound you spend and then you should classify each expense into specific categories such as food, clothing, transportation, etc. At the end of the month, you should analyze if you are spending more than you need in each category and make the appropriate changes. On the following months you will be more conscious about your spending habits and will be able to reduce them accordingly.
8. Lower Your Grocery Bill
Groceries are something you will be regularly spending money in. Thus, if you are able to diminish them to some extent, you will be able to save for your emergency fund at a quick pace. Some of the best ways to save on groceries include buying pre-packaged foods, buying own-brand products, purchasing in bulk, not being loyal to any specific brand, and never going to the store on an empty stomach.
9. Skip Vacation this Year
Vacation is a huge expense, especially if you have a large family. By skipping vacation this year you will be able to increase your emergency fund to a large extent. According to the Daily Mail, the average UK family spends almost 2 months’ worth of salary for their annual breaks. This is equivalent to £860 per person. By skipping this year’s vacation you will complete the minimum amount you’ll need to start your emergency fund – even if you don’t do anything else suggested on this list!
10. Buy a Piggy Bank
Don’t laugh at this one. Even baby steps count when trying to build your emergency fund. Every coin is useful for achieving your financial goals, if you don’t trust me ask any candy vending machine operator out there. There is even some mystic around piggy banks. They are associated it with good luck plus increased savings!