Life can come out of nowhere sometimes. You can be sitting there, minding your own business before a tree branch crashes through your window. Or, you can be having a lovely dinner at home and get a phone call that your son has been arrested and needs you to bail him out. Whatever the large, unexpected expense is, you’d better have an emergency fund to pay for it, or else you’ll risk financial ruin.
Spend less money
The first step towards saving up three to six months’ worth of living expenses in an emergency fund is to reduce your expenses. The benefit of living on less is two-fold. First, if you lower your expenses from $2,000 a month to $1,800 a month, you’ll have $200 more cash flow each month to put into your emergency fund. Second, since $2,000 x 3 months is $6,000 and $1,800 x 3 is only $5,400, you’ll reach your goal that much sooner.
Make more money
Another way to build your emergency fund is to make more money. This can be done in a variety of ways. First, you can ask for a raise at work, after demonstrating that you’re an asset to the company. Second, you can change jobs, either through a promotion or by moving to a different company. Third, you can get a part-time job (or side hustle) at a coffee shop, or restaurant — something that you can fit in around your primary job. Once you’ve found a way to make more money, you can devote the increased income to your emergency fund and probably won’t even miss the money.
Fix your credit
A big way to save money and build an emergency fund is to repair your credit. Whether you do-it-yourself or visit a credit repair company, the ultimate goal is the same — increase your credit score. Having a high credit score means qualifying for cheaper personal loans, car loans and mortgages. It also means never getting turned down for an apartment or job because your credit score is too low. To increase your credit, you should make timely payments on all your debts, keep your debt balances low and let time do its thing.
Building an emergency fund is one of the most important things you will ever do to secure your financial future. By spending less money, earning more money and fixing your credit, you’ll be all set to have your financial cake and eat it too.
