Strategies To Build An Emergency Fund From Scratch
Emergencies could come in the form of medical emergencies, appliance repairs and breakdowns, repairs around the house and other such expenses. There are various ways to save for these emergencies. To handle these emergencies one good way is to have a dedicated emergency fund that can be accessed only if you cannot afford to cover the expenses with the accessible funds at hand. These are also the situations that cannot be averted or postponed. Everyone has a different definition for emergency funds and there are different types of emergencies that people categorize as situations to tap the emergency funds. No matter what your strategy is, no matter how big the emergency expense would be you can still handle it if you have the right resources. If you have a strong emergency fund then you can easily do this. Here are some ways to build your emergency fund without any hiccup-
- Have a dedicated account
Dedicated account for emergencies would ensure that you do not use the account for the other purposes. This would ensure that your funds stay intact until the emergency arises. For other activities like trading and other types of investments, you could use your regular accounts.
- Check for all those impulsive buys and cut them off
In most cases, there are impulsive purchases like those done during a sale where the funds that could have been added to the emergency funds are converted into unnecessary expenses.
- Work on your health
While you build your emergency expenses work on a long-term solution – work on improving your general health. There are various unhealthy lifestyle habits that lead to frequent illnesses and the accompanying medical bills. When you can avoid them you can avoid tapping your emergency funds too often. And for the medical emergencies, you can always use your health insurance policy benefits.
- Manage your monthly expenses
To start building your emergency funds consistently you should work on ways to cut down your monthly expenses. There are multiple strategies that help you do this but the end result is that you can save more than what you save usually and thus you can allow these funds for your emergencies or for your investments.
It is alright to start small. The size of the savings made for your emergency account doesn’t matter as much as the consistency in contributing to it. The more consistent you are the bigger would your emergency funds be.