An emergency fund is an important part of preparing yourself financially for any tough times. Things don’t always work out and unexpected expenses might arise. Having an emergency fund ready for these moments is a really clever way of avoiding disaster and ensuring you can live a happy, stress-free life. To help you out in starting an emergency fund here are five simple tips to keep in mind.
1. Set Up A Goal
It is really important that you start saving for an emergency fund with a specific goal and amount in mind. For example, at first you could aim to save up £1,000. This will help with any small emergencies that might come up.
A good idea is to try and aim to save enough money to survive for three months (at least) in case you lost your income suddenly.
So think how much money per month you need to survive and save up enough to live for three months with no income.
2. Select The Right Account
It is also a good idea to carefully think about the account you use to store the money. It is a good idea to open up a separate savings account that you don’t have an instant access to.
If your account is easily accessed and you can just take money out whenever then the temptation to do it is a lot higher. So make sure that you can withdraw money without huge financial implications but that it still requires an effort to do it.
3. Take Your Time
You don’t need to panic too much over getting enough money for your emergency fund. For example, you shouldn’t have to suffer in order to set aside enough money. The key is to start saving as much as you can and as soon as you can.
There are some great tips for starting saving at the Simple Dollar website. There is plenty of information for first time savers and on how even small sums can be beneficial.
4. Adjust Your Needs And Goals
As your life situation changes it is important to keep changing your emergency fund goals as well. Make sure you regularly assess your financial situation and see if you should start saving more or if you can even cut down your saving.
Regular assessment guarantees you don’t run into any more problems. Ultimately you should aim to have enough money for a six-month period on your emergency funding account.
5. Use It Only For Emergencies
Above all it is really important to only keep the money for emergency situations. Don’t take money from your emergency fund in order to have a nice holiday. For things like that it is a good idea to set up a different account and save for it separately.
Only use this account when any problems occur and you have no other solutions. For instance, a household item breaks down and it won’t be covered by insurance.
The above five tips will help you start an emergency fund. You should create an emergency fund for your personal needs as well as for your business.