Beyond The Financial Nomad

HOW TO SAVE AN EMERGENCY FUND?

By Johnny Ortiz


Everyone knows they should have money put aside for emergencies but, it’s quite challenging to make it happen. Maybe you’ve tried making savings your priority before and failed or maybe you’re already operating on a tight budget.
Emergencies, by nature, are unpredictable and such unexpected expenses can strike when you least expect them. That’s the main reason saving money in an emergency fund is essential to good personal finance.
According to a recent survey, only 39% of Americans could cover an unexpected expense of $1,000 from their savings. Not being able to pay for emergency expenses can lead to crushing debt and that’s why the time to start saving for emergencies is today. 
Saving an emergency fund takes time, discipline, and some sacrifices but it can be done. However, if you’re not sure how to save an emergency fund, we’ve got you covered. Here, we’ll go over few easy ways to save for emergencies, no matter what’s your current income.

MAKE A BUDGET
The basic approach towards saving money for emergencies is to know how much money do you have coming in and where it is going so that you can find savings opportunities. And without budgeting, you may find it difficult to maximize income and find ways to manage and reduce spending.

Visualize what are your needs versus your wants and physically write them down. Seeing a pattern will honestly make yo sick to find out how much you spent on items that looked like needs but really were wants. As you progress in this saving budget method by writing what you need and price tagging them you will realize your essential budget.

LIVE WITHIN YOUR MEANS
According to a study by Federal Reserve, 44% of adults couldn’t pay $400 emergency bills, or they would need to borrow money for it. 
“Living within your means” means that what you spend every month is less than or at least equal to your monthly income. So, if you fail to cover your current lifestyle and your bills with after-tax income then you’re not living within your means. Many adults live paycheck to paycheck, which means they don’t have enough money for emergencies.

Let’s do simple math, if you earn $1,000 but spend $2,000 a month. Who really wins? The bank or you? 

SET A MONTHLY SAVINGS GOAL
Setting a monthly savings goal gets you into a habit of saving regularly and you’ll find it less daunting over time. The easiest way to do it is by automatically transferring money to your savings account or money market account each time you get paid.

While deciding on how much of your income you should save each month? It depends on your lifestyle and committing your mindset to save. The amount of money that goes to your emergency savings each month can add up within few years and can build a reliable emergency fund.

Did you want anything in your life? Cars, house, yacht, luxurious vacations on beaches? Make a monthly goal bucket so that you will find it easier with a target. What’s the point of a drive without a target. Give yourself a reason to have an ambition.

HOW MUCH YOU NEED TO SAVE FOR YOUR EMERGENCY FUND?
Typically you might hear that you will need three to six months worth of back rent. This is questionable to many. Why? It’s because who in their right mind has the right to tell you how much to save. Also every individuals has different circumstances. The important part about a emergency fund is to cover your emergencies. We suggest making what if scenario and measuring your worst emergency and creating countermeasure to combat that hypothetical emergency.
Challenge yourself with small steps. If you save $5 one week then save $10 and then so on and so forth. Find your best strategy to learn to save. Remember be forgiving of yourself but, keep yourself accountable because an emergency fund is there to save you and you alone. It’s not meant for anyone else.






REFERENCES
https://www.bankrate.com/banking/savings/starting-an-emergency-fund/
https://www.thebalance.com/easy-ways-to-build-emergency-fund-453608
https://www.mymoneycoach.ca/blog/saving-emergency-fund.html
https://www.nerdwallet.com/article/banking/savings/emergency-fund-why-it-matters
https://www.incharge.org/financial-literacy/budgeting-saving/how-to-save-an-emergency-fund/
https://www.clevergirlfinance.com/blog/why-you-need-an-emergency-fund/





 

6 Responses

  1. I think that world wide, that 39% is going to be even lower. Why is that? One of the reasons is because we aren’t taught how to handle money in school. We are taught all sorts of things we may never even use but not taught how to make a budget, how to invest, how to retire early and how to live life to its fullest and not just paycheck by paycheck. We as a society are often forgetting the individual and thinking more of companies, of hustling, of working 60+ hour workweeks. And this leads to a lower quality of life and less money.

    1. Hi Neil,

      Thank you for your comment. We strive in making a community involved in financial awareness. You are correct they don’t teach the necessities in basic fundamental education. Honestly, as a Nomad, I’ve seen that it is easier to sell anyone a luxury than to proclaim practicality.

  2. I’m trying to stay on top of my budget by using a simple Excel sheet where I have the money that comes in and the money that goes out. I have a few categories like regular bills, food, pet food, personal items (clothes, hygiene, etc). At the end of each day I take 2 minutes to add in the money I spent or made that day. This way I have a much better idea where my money is coming from and most importantly, going to. I can see where I need to control my spending. I also like to go a bit ahead of things and start next months’ budget ahead of time (after the 15 of each month) so I know, ahead of time, how our next month will look.

    1. Hi Caroline,

      Stay tuned. We are making a budget excel spreadsheet and will distribute it soon.

      We are trying to simplify how stressful financial independence is. A budget helps us become accountable.

  3. I am doing my best to have a bigger emergency fund (I’m thinking 18+ months here). 3-6 months is just not enough to make me feel safe and secure. I constantly have to worry about money when there’s no emergency fund there. Right now, we’re at about 8 months worth of money in the fund so still not there yet but we’re making progress.

    1. Hi Brody,

      Security is a part of life. Conventional wisdom is hard to stick or change. However, if you feel that you need 18 months then, you should try to save for 18 months. The most important part is to have an emergency fund, to begin with. Here at Beyond the Financial Nomad we challenge people’s goals to make it into a reality.

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