Emergencies are always unpredictable, and that is their nature. It could be a sudden accident, illness, unexpected job loss, or car repair. They are unavoidable and can drain your wallet. Everyone has to deal with these unplanned expenses at some point. But, it can be challenging if you have a low income, and with time, it can push you into debt traps. While emergencies cannot be prevented, having an emergency fund set aside is paramount.
Some people will opt for an instant personal loan when they have an emergency, but being prepared beforehand can save you a lot. By starting to save for an emergency fund, any unplanned expenses can be settled without worries.
What’s an Emergency Fund?
This is a separate bank account or a savings account where you put money into it regularly and can be used to settle unexpected expenses like medical bills. It acts as a safety net that you can only use during an emergency. You should not consider it as a nest egg that you can dip into when you feel like going on a vacation or getting a new car. An emergency fund should only save you from dire, unavoidable financial situations.
Saving small and regular money is one effective way to start. Instead of saving huge amounts of money once in a while, start by saving smaller but regularly. Consistently taking smaller steps toward your goal can help you reach greater heights. Saving consistently will get you into a savings habit without committing a lot of money. Besides, it will allow you to budget your spending for a week or month. Saving money regularly is the way to go. It makes a huge difference. Just like saving to buy a new card or a wedding, decide on the amount to set aside.
How to Save for Emergency Fund
Saving in an emergency fund is easier said than done. But due to the unforeseen future situations, you need to be disciplined and start that immediately. You never know what might happen tomorrow. Life always throws us unexpected curveballs, and it is ideal if you have a savings fund that can act as a shock absorber when found in a tight financial position.
If you don’t know where to start with your savings fund, here are tips on how to save for the emergency fund:
Create a Separate Savings Account
First, you need to set up an account where you will be depositing the little money you get into. The account should be separated from the wages account. With this account separate, you won’t be easily tempted to use the funds for your daily expenses.
Review Your Budget
Next, you need to review your budget to see how much money you can set aside into the savings fund. You will narrow down the expenses and your total income and see the remaining amount. You can then decide on the remaining amount and how much you will put into your emergency fund. As a rule, set aside 50 percent of the income to cater for the daily necessities, 30 percent to your wants, and 20 percent for savings and other debt repayments to the private lender. After that, you can now calculate the amount to put into your savings account.
Automate the Savings
Another great way to save in the emergency fund is to set up the automatic payment. It is where you decide on the amount of money you want to be directly transferred to the savings account, and once the income gets into your account, the money is directly transferred to the fund. This is a great way to never miss out on making savings. In fact, this can be a great solution for those who find it hard to make savings. It makes saving super easy.
Let’s say you always add Rs. 4000 each month to your savings fund. After two years, you’ll have saved about Rs. 96000. If you increase the amount to Rs. 5000 every month, your savings will grow to Rs. 120,000. If the amount increases, you will end up having sufficient funds in your fund to settle for any unexpected situation that may arise.
Consider Trimming Your Spending
Cutting down on your spending is a good way to save enough in your fund. By doing this, you will be able to free up more funds to put into the savings. To do that, you need to first check your budget and see those items you can completely remove from the list. Also, avoid impulse purchasing and track your spending.
Another important thing is to opt for cheap alternatives for groceries, travel, entertainment, etc. At last, you will find a lot of money left to add to the fund.
Keep Adding Money to the Fund
If you want to achieve your goals, consistency is the key. Similarly, even as you save for emergencies, don’t stop putting money into the account. It is very important to be prepared for these rainy days because, during such times, you find yourself in a tight spot, and you may not know where to turn.
In case of an emergency and you have no savings to get through it, you can get an instant loan from lendingplate. You don’t need to wait for days in order to get your money; they are approved within a few hours.
