When you’re struggling just to pay the bills, the last thing on your mind is building an emergency fund. The sad fact is that 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 we’re struggling or not.
That’s why an emergency fund is so important. It is the security blanket you need for those inevitable moments of crisis. But, 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 for building an emergency fund when times are tight:
Learn to trim the fat
You may struggle 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 you’re 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 you switch to a cheaper plan?
• Could you do a better job of avoiding the vending machines at work?
• How good have you been at consolidating 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.
Take advantage of “windfalls”
Resist the urge to spend unexpected financial windfalls. Too often these financial gains feel like “free” money and we succumb to the urge to spend this money capriciously. But this unexpected income can create the foundation for a strong emergency fund. Make a promise not to spend your income tax refund, bonuses, pay raises, or other financial gifts, and instead, beef up your emergency fund.
Put the little “luxuries” on hold
If you don’t have a small emergency cushion saved you shouldn’t even consider going to the movies. Not when you can rent free videos from the library. Same goes with meeting friends for drinks, going out to the club, or engaging in a little “retail therapy.” Building a financial life raft is just too important.
To help with your “luxury fast” realize it’s only temporary. Once you have your emergency fund in place you can always return to the little luxuries you enjoyed so much. Besides, you may just find some new low cost or free ways to have fun.
Dust off your piggy bank
Your childhood piggy bank could help you create a stable emergency fund. Try this, – at the end of each day place your loose change and any one dollar bills you have left-over into a piggy bank. Over time, you’ll begin to amass a significant amount of cash.
Take a gift giving break
With the holiday season upon us, it’s easy to get caught up spending extravagantly on others. But instead of giving gifts to others, consider giving a gift to your emergency fund. Discuss limits on gift spending with friends and relatives. Consider a per person spending limit to prevent your holiday gift giving from getting out of control. Refuse the temptation to purchase every gift under the sun for you kids. Take the savings and apply them to your emergency fund for financial peace of mind.
Sell some of your stuff
One woman’s junk is another woman’s treasure. You’d be surprised at how quickly your old futon or Ikea shelf sells on Craigslist. Books and textbooks can be sold on Amazon using their third party seller services. Likewise, Ebay and consignment shops can turn your old fashions into cold hard cash.
Bonus: Find a side-hustle
Are you a school teacher? Perhaps you did well in college Chemistry 101? If so, tutoring could bring you some nice cash. But don’t only think in traditional terms. Your skills might prove valuable. You’d be surprised at how many people would pay you to teach them how to use WordPress, Photoshop, or Microsoft Excel.
Websites like Craigslist make it easier than ever to advertise your services. Just make sure to meet your clients in a public location.
Freelance writing, reselling vintage clothes you find at thrift stores, pet sitting, and website design are just a few of the other ways could earn some serious money.
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.
BMWK, it’s your turn. How do you save for emergencies when times are tough?