After establishing a budget, the next step to a wise money management system is to establish an emergency fund. Experts recommend keeping at least three months of living expenses in a reliable, liquid account. It may take some time to save 3 – 6 months of living expenes and deter most people from trying. The key is to start somewhere. A great target to start is $1000. Do you have $1,000 set aside for emergencies? If you already do, you could probably use another $1,000 in that account.
An extra $1,000 can be a life-saver. It can be the difference between paying cash for an emergency car repair or being without your car or incurring more debt. But finding $1,000 to save isn’t always easy. Below is a 4-step plan on how to save $1,000 in 10 months.
Get Started with These 4 Steps
- Find a Safe Place to Save Your Money – You will want to save your money in an account that you can access easily in case of an emergency. That means you should probably not keep this savings in a U.S. Savings Bond or in mutual funds. Choose a traditional savings account (early withdrawal penalties on a CD rarely lower the yield below that of a savings account.) Consider opening a new account or sub-account for this money so you’re not tempted to spend it. Most importantly, do not keep savings in a checking account, which pays no or low interest and is too easy to access.
- Save $100 a month – If you are already saving $100 a month, great! Skip to step 3. If not, you need to either earn $100 more a month or cut back in order to find that $100 to save. America Saves has a list of 54 ways to save money to get you started. It can also help to pay yourself first and save the $100 at the beginning of the month instead of waiting to see if you have money left over to save at the end of the month.
- Automate Your Savings – Setting up an automatic way to save is one of the best ways to save. Once you set it up, then it happens without having to think about it. Here are two ways to automate your savings. 1. Every pay period, ask your employer to deduct $100 from your paycheck and transfer it to a savings account. Ask your HR representative for more details and to set this up. 2. Ask your bank or credit union to transfer $100 from your checking account to a savings account every month. Talk to your local bank or credit union to set this up.
- Watch Your Savings Grow for 10 Months – The final step is to sit back and watch your savings grow. How often do you look at the calendar and think it’s half way through 2014 already? The same will apply to your savings; Before you know it you will have that $1,000. They key is not to touch the money unless you have an emergency – that’s what the money is there for after all.
Once you have at least $1,000 in your emergency account, continue your savings success and continue to build your emergency savings or apply that money to a new savings goal. Perhaps you have debt you need to pay down or want to save for a car or home.
Samirian Hill, The MoneyWise Teacher, is President and Founder of BudgetWise Financial Solutions, LLC, where they teach people to manage money wisely. We engage, educate and empower professional women and entrepreneurs to save money, reduce debt, and build wealth. Contact us for a complimentary 30 minute consultation. Learn more at www.budgetwisefinancial.com