GuidesPersonal Finance

How To Build An Emergency Fund

Man collecting water in bucket from hole in the roof

We all have financial goals that we’d love to achieve in our lives. For some of us, the dream is being able to put a deposit down on the house of our dreams. For others, all we want is to buy a new car so that we can comfortably get to work and back every day.

While saving towards your financial goals is important, it’s also crucial to ensure that you’re prepared for anything too. An emergency budget is the cash safety net that you’ll build up before you spend your cash on anything else. Unfortunately, a lot of people struggle to determine how they can find the extra cash for this kind of protection. 

Know How Much You Need

How much money do you need to save in your emergency fund to be safe? There’s no one-size-fits-all number here. The amount of cash you need will depend on your monthly bills, and how much money you generally earn each month.

Most experts recommend having somewhere between three and six months of your income aside just in case you need to pay for some unexpected bills, or you lose your job and need to keep handling regular costs. There are some cases where you may need extra cash, however. If you’re a freelancer, or you’re living on an unpredictable income, it may be helpful to have some extra money on the side for months where you’re not earning as much.

Look for Ways to Increase Your Earning Potential

Most people struggle with building an emergency fund because they’re already spending all of their income on bills and regular expenses. If you’re struggling to save up your safety net because you’re not earning enough in the first place, it might be time to increase your earning potential. Look into career opportunities that you might want to pursue that could help you to earn more, or ask yourself whether you could earn a promotion with some extra skills.

Man teaching adult education in class room

These days, it’s easy to build out your resume by taking a course part-time. You can even take out a student loan from a private lender that makes it easy to pay for a higher education graduate degree. The more you’re capable of earning, the better off you’ll be. You could even think about getting an extra part-time job with your new degree.

Keep Working on It

Finally, remember that once you have your emergency fund, you’ll have access to greater peace of mind, and more confidence. You’ll be free to start putting your extra money to your long-term and short-term goals, rather than focusing on being prepared for unexpected issues. However, it can take time to build up a fund that you’re comfortable with.

The most important thing you can do is get started, and keep working on your fund. Even if you’re only putting a small amount of your income away each month, or there are months when you need to skip saving, you’ll still be making progress. Don’t let small hurdles on your path to success stop you from staying focused on your goals.

Poppy
About author

Poppy loves personal finance almost as much as she loves her two cats, Tif and Taz.
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