5 Easy Budget Tips to Set Aside $1,000 for Emergencies
A 2014 Federal Reserve survey shows that only 53% of people say they can cover a $400 emergency without borrowing money or selling something. It would be weird to think the only way to pay for a new alternator is to sell your couch or get a loan from your parents!
It’s better—tons better, believe us—to have an emergency fund for expenses that hit you out of left field. Increasing the buffer between you and those “Why me?” expenses that pop up will relieve some of the stress that comes with an unexpected emergency.
Here’s how to budget your way to an emergency fund without selling a thing or borrowing a dime.
1. Create a budget. Just putting your income and outgo in front of you helps you see where you can make adjustments and free up money for savings. You never know how much extra money is in your budget until you make one.
2. Have a “savings” line item. Save money before you pay any bills. Put a category marked “emergency fund” in your plan with a certain amount to sock away each month. That account will gradually build up and be ready to cover you if your car battery dies or your A/C goes out in the middle of the summer.
3. Put excess funds in the emergency fund. Once you’ve filled out your budget and everything is accounted for, you may have some leftover money that can be used elsewhere. Give that money a new home in your savings category!
4. Trim your expenses. See where you can tweak your spending to save money. Go with a different cable package (you could save $20 a month), clip grocery coupons (save $20 a week), or sign up to receive restaurant deal emails (save $5–10 per visit). Those alone add up to more than $100 a month.
5. Track your spending. Staying on top of your transactions is important because it helps you spot areas where the spending is getting too close to your planned amount. If you see that you’re halfway through the month and 90% of the way through the restaurant money, you’ll know it’s time to trade the appetizer menu for those leftovers in the fridge.
Using a budget is the best way to save money for emergencies—but it’s not the only way.
Give Your Emergency Fund a Quick Boost
If you want to increase your emergency fund contributions a little faster, here are some suggestions for making it happen.
Earn extra income. Side jobs speed up your emergency fund progress as long as you focus the money toward savings. Start a lawn care side business, drive for Uber, or sell your homemade crafts on Etsy. Put your natural skills to use!
Price shop your fixed expenses. Compare prices on things like car insurance and gym membership. Set aside an hour or two to do some research or call customer service. Chances are, you could get the same service for a lower cost somewhere else. If you find that you already have the best price, ask a service rep if they have smaller packages such as limited vs. unlimited gym access.