How to start saving an emergency fund?
An emergency fund is needed just in case you lose your job, a member of the family gets rushed to the hospital, or one of your friends gets involved in a vehicular accident. But with your money tight and your funds still in disarray, how to save emergency fund? What do you need to do in order to save up on cash while saving and spending for those immediate needs in your household?
In his book The Total Money Makeover, Dave Ramsey says that this should be the first thing that anyone should do in his Seven Baby Steps. Why is this highly important? Simply because you need emergency funds just in case there is no income for you get back to anymore.
Here are ways on how to save emergency funds while setting aside some portion for your immediate and variable needs as well.
Find Out How Much You Can Save- The first thing to build up on the emergency fund is to consistently know how much you can save. For instance if you get paid twice a month, you need to constantly divide your money into four categories every pay day. Separate your bills into fixed costs, savings, regular bills and retirement savings. Fixed costs includes your food, transportation expenses, mortgage and rent payments while regular bills are your phone or internet bills or your utilities.
But the question now lies. How much should you save and set apart for each category?
Some experts say that for your retirement savings, you should at least save 10%. Your 90% should take care of the rest. Assuming that you need at least 85% for your savings, regular bills and fixed costs; 5% is then what's left of your emergency fund. In layman's terms, if you are making $2,000 per payday, you set aside $200 for your retirement savings, $1,700 for your regular bills and fixed costs. And then, you can get to save $100 for your emergency fund.
If however you think that your income is not enough for you to have an emergency fun, you might think of getting another part time job.
Look At Your Savings Goal- Now that you know how much you'll be saving in a month, the real question is: how much do you really want to save?
Dave Ramsey suggests that you can start with $1,000. The example above clearly shows that you are saving at least $200 a month which means that in just five months time, you are reaching that goal of $1,000. Unfortunately, how to save on emergency funds doesn't only involve that small amount; some experts have said that you need at least six months of emergency funds - or even a year - to survive.
If for example your monthly expenses costs up to $3,700 and you need at least three months of your emergency fund, you need to set aside at least $10, 200. When you save $200 a month, it will take you around 51 months to come up with that much needed amount.
Set Up An Online Savings Account- If you are tired of just transferring money from your checking account into your savings account, here is a better way. Go automated by setting up an online account at Ally Bank or ING Direct and the transfer is automatic. How to save emergency fund means you'll be less tempted to spend the money.
In his book The Total Money Makeover, Dave Ramsey says that this should be the first thing that anyone should do in his Seven Baby Steps. Why is this highly important? Simply because you need emergency funds just in case there is no income for you get back to anymore.
Here are ways on how to save emergency funds while setting aside some portion for your immediate and variable needs as well.
Find Out How Much You Can Save- The first thing to build up on the emergency fund is to consistently know how much you can save. For instance if you get paid twice a month, you need to constantly divide your money into four categories every pay day. Separate your bills into fixed costs, savings, regular bills and retirement savings. Fixed costs includes your food, transportation expenses, mortgage and rent payments while regular bills are your phone or internet bills or your utilities.
But the question now lies. How much should you save and set apart for each category?
Some experts say that for your retirement savings, you should at least save 10%. Your 90% should take care of the rest. Assuming that you need at least 85% for your savings, regular bills and fixed costs; 5% is then what's left of your emergency fund. In layman's terms, if you are making $2,000 per payday, you set aside $200 for your retirement savings, $1,700 for your regular bills and fixed costs. And then, you can get to save $100 for your emergency fund.
If however you think that your income is not enough for you to have an emergency fun, you might think of getting another part time job.
Look At Your Savings Goal- Now that you know how much you'll be saving in a month, the real question is: how much do you really want to save?
Dave Ramsey suggests that you can start with $1,000. The example above clearly shows that you are saving at least $200 a month which means that in just five months time, you are reaching that goal of $1,000. Unfortunately, how to save on emergency funds doesn't only involve that small amount; some experts have said that you need at least six months of emergency funds - or even a year - to survive.
If for example your monthly expenses costs up to $3,700 and you need at least three months of your emergency fund, you need to set aside at least $10, 200. When you save $200 a month, it will take you around 51 months to come up with that much needed amount.
Set Up An Online Savings Account- If you are tired of just transferring money from your checking account into your savings account, here is a better way. Go automated by setting up an online account at Ally Bank or ING Direct and the transfer is automatic. How to save emergency fund means you'll be less tempted to spend the money.
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