Try these tips to get a jumpstart on building a respectable emergency savings fund this year.
Have you tried without success to build emergency savings? Maybe pandemic financial hardship got in your way for the last two years or you just never could commit. Or maybe the idea of saving enough to cover big and small emergencies just seems too intimidating.
After all, financial experts recommend having enough emergency savings to cover all expenses for at least five or six months. That means even if you earn $5,000 a month, you’d need to save $25,000 to $30,000. If you earn $7,000 a month, the figure is even more daunting: $35,000 to $42,000. Who wouldn’t be intimidated by those steep amounts?
But you don’t have to focus on that lofty six-month goal just yet. You can start small, saving until you have at least $1,000 dollars in emergency funds. Then that achievement can inspire you to keep building emergency savings to a higher amount.
2022 could be the year you finally have an emergency fund. Here are four tips to get started.
Sell stuff around the house
If you look around your home, you probably have at least a few things you could sell on Facebook Marketplace, eBay, Craigslist or another online marketplace.
What about that exercise bike or other equipment you bought when your gym closed temporarily due to the pandemic? If you’re back at the gym and never use the bike, someone who’s not ready to return to their fitness center could benefit from the exercise. Plus, you can pocket at least a couple hundred dollars to deposit in your emergency savings account.
Items you could sell online for extra cash include furniture, lamps, exercise equipment, lawn tools and electronics.
Open a bank account with a sign-up bonus
Many banks offer bonuses ranging from $100 to $300 when you open a savings or checking account and receive the required amount of direct deposits within the specific time frame. For example, in 2021, Wells Fargo offered a $200 bonus for opening a checking account with a minimum deposit of $25.
To receive the bonus, the account holder needed to receive at least $1,000 in direct deposits. There are savings account bonuses too, but don’t be deterred if the offer is for a checking account. You can treat the account as savings. Besides, you may want to write a check or use the account’s debit card to cover expenses when you have an emergency.
To find bank account bonuses, use the search term “banks with bonuses for opening an account.”
Earn extra income from a side hustle
One of the fastest ways to add cash to an emergency fund is to earn more money from a side hustle or part-time job. You may not want to work all day at your main job and then work a second shift at a part-time job or side hustle. But if you can commit to working a second job for just a couple of months, you can earn enough to build a respectable emergency fund.
How fast can that extra income add up? Here’s an example. If you work 15 hours a week for eight weeks at a part-time job that pays $15 an hour, you’ll earn $1,800. After taxes, you’ll still have more than enough to save at least $1,000 or more in an emergency savings account.
Have your employer make contributions
If you can set up a direct deposit from each paycheck into your emergency savings account, the balance can increase significantly (and painlessly) in a short time. Even $50 from each biweekly paycheck adds up to $1,300 in a year. Direct deposits of $100 from each check could add $2,600 a year.
Detox your finances with a spending fast
You’ve probably heard of detox fasts with diet, but did you know that taking a “spending fast” for as little as 21 to 30 days can free up some serious money? With a spending fast, you intentionally cut out or reduce daily and monthly expenses, so you spend less.
For example, if you go out for lunch or dinner every day, commit to preparing most of your own meals at home. To save on gas, try to schedule errands in batches. If you can cut your grocery bill in half by shopping at a discount grocer, go for it. You could cancel or pause a couple of streaming services.
Then take the money you would have spent and deposit it in your emergency savings account. You may even find that the $200 to $400 you saved inspires you to implement some of your new spending fast habits into your monthly budget.
Published by Debt.com, LLC