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How to Create and Build a Financial Emergency Fund

Saving for a rainy day is a common theme this year, as many people have experienced Coronavirus-related financial strains.

An emergency fund is a financial buffer that will keep you afloat in a time of unexpected expenses or a halt in your income. The main purpose of an emergency income is to help people avoid overusing credit cards or taking out additional loans–usually at high interest rates.

Some of these unexpected expenses might include:

  • Medical expenses
  • Appliance repair or replacement
  • Car repairs
  • Unemployment

You probably have heard that everyone should try to save enough money to cover three months’ worth of bills, should any problem arise. Some savings specialists even put that number as high as half a year of expenses, but setting that much money aside just isn’t possible for some.  So how do you get started?

Building a Financial Emergency Fund – Even When You Think You Can’t

Start by creating a plan. Chart your monthly income and expenses and separate your bills and necessities from excess spending. The money you set aside won’t come from your regular monthly expenses. Obviously, you’ll still need to be paying bills and buying groceries, but you should still make a conscious effort to set some money aside, even if it’s only $25 or $50 out of each paycheck. Some employers even have the option to transfer this money directly into an account for you on payday. That way, you won’t miss it and your emergency fund will continue to grow!

Boosting Your Savings Account

Many people think they aren’t able to save enough because their monthly bills are too high or they don’t make enough to set aside. If you’d like to boost your emergency savings account, supplement with unscheduled or additional influxes of funds, like your tax refund, side job, or freelance gig. You can work on your own time and at your own pace through hundreds of online and mobile options. Check out a few ideas at thebalancecareers.com.

Cycle Your Streaming Services

Another tip for boosting your emergency fund is to cut back on streaming services and recurring subscriptions, which might be hard to hear in the time of self-quarantine. Instead of cutting them all out completely, cycle through them from month to month. For example, instead of having multiple music and video streaming subscriptions, pick one to subscribe to each month. Many streaming services don’t require a contract anymore, so putting one or more on hold for a few months won’t result in cancellation fees. Once you decide to switch back, they are simple to reactivate. Using this method, you can cycle through different collections at your own pace instead of covering all of them (even when not in use) and you’ll save money each month. 

Since the quarantine began in March, it’s even more important for people to have an emergency fund to fall back on. If you didn’t have a plan before, you’ve definitely though about it since! Take a moment to review your finances and start a budget.  Even if you did have a plan, you might need to adapt it because of the “New Normal” we now face. 

Should you need any help setting up a savings account or emergency fund, contact the financial experts at Falcon National Bank. We would love to help!

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