Saving for an Emergency: How Much Do I Need and How Should I Save It?
How would you cope with a natural disaster, emergency home repair, or sudden car problem? In this tough economy, many military families are never more than a paycheck away from financial disaster. An emergency fund can be the difference between weathering the storm and going under. Knowing how much you need to sock away for a rainy day is absolutely vital; knowing how to save it is just as important.
How Much Should You Save?
Although most experts suggest an emergency fund should be able to cover six months’ worth of expenses, that figure can be overwhelming. Start small. Use an influx of cash such as a tax refund or bonus paycheck to kick-start your savings and get enough in the bank to pay the bills for 60 days. Use this as a starting point to build your fund until you have half a year’s worth of expenses saved.
What are the Best Ways to Save?
It’s hard to save money when the budget is already tight. Building your emergency fund may mean making some different lifestyle choices. Commit to giving up one luxury a month. Skip the lattes in January, the movie rentals in February, and the restaurant meals in March. Before long you will see your emergency fund grow as you add the money you’ve saved.
You can also set up an automatic transfer from your checking to savings each paycheck. It’s easier than having to remember to do it yourself and there’s less risk that you’ll spend the money on something else.
Using only cash to pay for things can be a great deterrent from buying unnecessary items. Research suggests that people spend up to 50% more when using credit or debit cards.
Look for wiggle room in your monthly bills. Can you cut the premium movie channels, switch to a cheaper cell phone plan, or find ways to save on heating expenses? The money will do you more good earning interest in a savings account.
Overcoming the Unexpected
Military families are some of the most prepared people on Earth. However, even the most organized people can’t prevent or prepare for some situations. An unexpected deployment, serious injury, or long-term illness can quickly deplete your entire emergency fund. If and when this happens, Just Military Loans provides armed forces loans that can help you out of a bind.
Preparation is key when it comes to saving for an emergency. With proper planning, diligent saving, the right attitude, and Just Military Loans, you can navigate whatever life throws your way.
Do you have an emergency fund? How did you build your savings for it? Share your experiences with us!