Many of us have learned about the importance of emergency savings this year. If you’ve depleted your funds, or just now realized that you should stash some cash, there is no time like the present to start up a savings account. Just follow these simple steps.
Open the right type of account. If you’re just starting an account, look for one with no fees or minimum balance. That way, you won’t end up spending money to save. Ask about interest rates, too, and don’t hesitate to shop around a bit.
Keep in mind that the point is to have fast access to your money in the event of an emergency. Avoid choosing an account that imposes withdrawal fees or limits.
Review your budget. Cut back on unnecessary expenditures and look for ways to save money on essentials. The money that you free up from your regular budget can be diverted into a savings account.
Negotiate your bills. On that note, shop around for better insurance premiums, negotiate medical bills, and ask your credit card companies for lower interest rates. Take a closer look at your internet and phone packages, too. It never hurts to ask, and you can score discounts that help you build more of a surplus in your budget.
Divert cash straight from your paycheck. The easiest way to build up an emergency fund is to divert cash straight from your paycheck into a savings account. Since you never “see” the money, you aren’t tempted to spend it. Plus, it’s one less chore to remember.
Consider ways to make extra money. If you can pick up some overtime, open a side business, or get a second job temporarily, you can beef up your emergency savings much faster.
Set a savings goal. Many people aim to accumulate six months of living expenses in the bank. This is a reasonable goal, as six months gives you a nice buffer to find a new job in the event of unemployment. However, your situation might be different, so let’s discuss your savings goal at our next appointment. We should evaluate your individual risk factors, and then set a reasonable target for emergency savings as well as retirement plans.