How To Start Building An Emergency FundNOVEMBER 6, 2019
Life is very unpredictable. We can drink and be merry today and be bankrupt tomorrow. Since life is full of uncertainties, it is always a wise decision to start building up for an emergency fund or also known as the rainy day fund.
What is an emergency fund and how to start building one?
An emergency fund is a dedicated savings for unforeseen financial crisis or expenses such as sudden job loss, child or pet emergencies, medical emergencies, and etc. ideally, it should financially support you for about three to six months.
Emergency funds are not the money you save for planned purchases like houses, cars, gadgets, tuition fees, and etc. This kind of fund doesn’t have to start in big amount, the amount actually varies depending on one’s lifestyle.
To fully equip our members on how to start building a rainy day fund, MAGCOOP lists some tips on how to save up for your emergency fund.
1. Try to adjust your monthly budget.
It always boils down to budgeting. Think of your emergency fund the way you think about your savings. Once you get the money from your paycheck, set aside your emergency fund right away.
If you find this difficult, try trimming down some of your monthly expenses and try various ways to save such as cooking meals at home instead of eating out or car-pooling instead of using expensive ride-hailing apps and services.
2. Be realistic and start in small amount.
Aiming for a lower initial amount for your emergency fund is realistic and attainable. Once you have reached your goal and get the hang of setting aside money for this fund, try raising your goal so you can save up higher and bigger emergency fund.
3. Don’t spend it.
You may be tempted to spend a portion of your emergency fund once you see that it’s growing. The secret? Avoid spending it to non-emergency purchases. Always keep in mind that emergency can strike you anytime. You’ll be glad you controlled yourself from touching it once a true emergency arises.
Your emergency fund will not grow if you don’t start today. It takes financial discipline and consistency in order to build funds in order to secure your future. For more tips, head on to our website www.magcoop.com and learn more about different ways to effectively manage your finances.