Emergency Fund and Save Money

download-7Experts say everyone should have an emergency fund, a reserve of three to six months’ worth of living expenses. But many consumers struggle to save when trying to cut debt and cover all of life’s other expenses.

“Probably one of the most underused pieces of financial advice we give is to scrape together an emergency fund,” says JJ Montanaro, a CERTIFIED FINANCIAL PLANNER™ at USAA. “If you don’t have any savings in the bank, you’re almost certain to end up in debt as a result of unexpected expenses.”

If you haven’t started saving, don’t panic. These six tips can help you get started:

  • Set a goal. Estimate how much you spend each month on essentials such as rent or a mortgage, utilities, food, car payment and insurance. Multiply that total by three — this is your minimum savings goal. If you have no savings, $1,000 is a reasonable start. Work gradually toward saving more, and don’t be intimidated by the numbers; the important thing is to start setting aside money regularly.
  • Track expenses. Using online banking,track your spending and break down your daily spending average. Identify nonessential purchases and trim them from your daily budget. Put the extra cash toward savings.
  • Automate savings. Set up an allotment or an automatic transfer from your checking account, maybe $25 or $50, into your savings account each payday. You can also automate additional contributions each week. Even small amounts add up — $20 a week for a year equals $1,040 in savings.
  • Round up. Round your debit card purchases to the nearest dollar, and move the difference into your savings account at the end of the week. For example, if you bought lunch for $8.36, round up to $9 and set aside the 64 cents for savings.
  • Save unexpected income. A tax refund or consumer rebate can contribute to a healthy savings account. So can a pay raise, bonus, cost-of-living adjustment or extra income from a part-time job or freelancing. Directing at least part of this money to your emergency fund will help you reach your goal sooner.
  • Make minimum payments. Paying off credit cards makes sense but not until you have a small emergency fund, at least $1,000, on hand. Having savings in place keeps you from having to use your credit card for emergencies.