Money. There never seems to be enough of it for the things we need. What’s worse is that Americans are increasingly unable and fearful about what they would do if an emergency expense hit them.
Are you prepared if your car needed a major repair? What would happen if your refrigerator died or you’re unable to work due to an extended illness?
Ordinary expenses are rising while paychecks are stretched thinner by the month. How are we to save for a rainy day when it’s hard enough keeping our heads above water when things are going well? Fear not! We have taken information from experts and compiled them into a collection of the best money-saving suggestions we’ve found.
Debt and Savings in America
It isn’t news that incomes are stagnant while the cost of everything continues to rise. One only needs to look at their account balances for proof. Since 1960, average personal savings has decreased from 10 percent to 8 percent.
While savings are down, consumer debt has risen.
According to reporting from the New York Federal Reserve, consumer debt has risen to an all-time high of $4 trillion and rising. The biggest sources of debt are mortgages, auto loans, and student loans.
However, it isn’t just the necessities like food, shelter, transportation, and education that make saving money more challenging. Credit card debt is breaking previous records over $1.02 trillion, the former record in 2008. On average, credit card users state that they roll over $2,500 in credit card debt each month.
You don’t want to be caught off-guard when the unexpected happens. Here are some ways that you can avoid becoming a statistic and save money for emergencies.
5 Painless Ways to Save for an Emergency
According to statistics, 28 percent of Americans don’t have any money saved for an emergency. The first step to creating a rainy day fund is to have a plan and a goal in mind.
Evaluate Your Finances
If you haven’t made a budget yet, now is a good time to start. This will help you see exactly where your money is going and identify areas where you can cut back. You’ll also want to determine how much money you need to put into an emergency account. A general rule of thumb is to save at least three full months of living expenses.
Use Your Budget as a Savings Guide
Once you know what your fixed and variable expenses and have identified areas where you can save money, create a category on your budget to account for your emergency fund. Many mobile banking apps will allow you to allocate a certain percentage or dollar amount and arrange an automatic deposit into a savings or money market account. Make sure to choose a bank or credit union that offers competitive rates and a range of investment/savings products.
Estimate the amount you can save by certain milestones such as “Within Six Months” or “Yearly Savings Goals”. You can also use a 52-week savings plan to start saving with just a few dollars a week. Reconcile your budget, savings plan, and goals to create an action plan to reach your goals.
Look for Other Ways to Save
Are you carrying a credit account with a high-interest rate? You can save money by consolidating your credit onto one low-interest card and leaving the higher interest account dormant. Don’t close any accounts, though, as this will lower your credit score.
Pay off any smaller loans as soon as possible, and avoid taking on any unnecessary debt.
Increase the Funds in Your Account Whenever Possible
You can sink the cash you save from getting rid of that car loan or using credit cards with lower interest rates right into your account. Expecting a tax return? Put that into your rainy-day fund as well. The same goes with other financial windfalls, big or small.
Make Savings a Priority
Use the business advice to “pay yourself first” to your advantage. Too many people see saving money as an afterthought. “I’ll put away whatever is left from my paycheck each week,” is a common mindset.
Rather than saving “when you have a little money left over”, determine a set amount that will help you reach your goal within the time that you set to reach it, and put that amount aside first before you spend another penny.
Follow these tips and before you know it, your money pool will be overflowing.
Few of us have unlimited resources and a supply of cash on hand. However, that doesn’t mean that you can’t find ways to create and increase your rainy-day fund. By incorporating the above suggestions into your personal budgeting/savings plan, you’ll be better able to meet whatever challenges life throws your way.