Are you and your family prepared for the unexpected?
With a new year almost here, it’s not only time to think about your goals and resolutions, but it’s also the perfect time to think about protecting your assets, your safety and well-being, and your family. One way to accomplish this is by building an emergency fund.
This is a guest post from Chonce, at My Debt Epiphany, who is working through paying off $30k in debt.
I know first-hand that it’s not always about just getting by with covering all your expenses and paying off debt. Those things are important, but it’s also important to ask yourself what you would do if it all went wrong.
What would you do in the event of a true emergency?
This year I spent a lot of time, effort and hard work earning extra money and budgeting well to pay off a nice chunk of debt. I ended up blowing my original goal of paying off $8,000 in debt out of the water by paying off over $11,000.
I feel great about the progress made by paying off a lot of debt, but I can’t help but feel like I spent the first half of the year stressing out because I wasn’t putting enough toward debt and the second half of the year freaking out because I was putting so much toward debt that I wasn’t even saving.
Unexpected things happened, and my family and I ran into a few hiccups in the road, but God forbid if anything really bad ever happened, I knew we wouldn’t have the money to work on fixing or finding a solution to the issue and that’s no way to live.
If You Want to Pay off Debt, Start Saving
Saving and paying off debt go hand-in-hand. You won’t get far with your debt if you don’t save for emergencies or unexpected events because every time something bad happens, you’ll either have to spend the money you were going to use to pay off debt or worse, use a credit card or take out a loan and rack up even more debt.
Realizing how important saving is (even if it’s just offering peace-of-mind), I’ve decided to save half of the extra money I earn in 2016 and use the other half to pay off debt.
I may not pay off my debt as quickly as I wanted to by implementing this strategy, but I’ll be much more secure and prepared for the unexpected.
Here are 5 more specific ways you can boost your emergency savings to become more financially stable and prepared as well.
1. Start Selling Things from your Home
Have you deep cleaned and purged items from your home yet?
When you go through your home and declutter for the new year, instead of throwing away all the items you don’t want or need, try selling them instead. You can host a garage sale, or list the items online on Craigslist or eBay if you’d like to reach more people.
Whether it’s clothes, games, toys or furniture, your old items can really add up and help you generate some extra income. Set a goal of how much you’d like to earn and keep adding more items to your inventory. Put all the profit you earn from the sales into your savings account or emergency fund to give it a nice boost at the beginning of the year.
2. Get a Second Job
Getting a second job may not sound like a fun idea, but if you are in a financial bind or very well could be, you might want to consider doing some extra work on the side to beef up your emergency fund quicker.
Try a weekend job for a few hours per week or establish a consistent side hustle that will allow you to earn money via a side business or working from home. Stick with your second source of income for a few months until you feel comfortable with your amount of savings.
3. Cut Your Grocery Bill by a Third
If you’re wondering where all your extra money is going throughout the month, you may be eating it. Spending excessive and unnecessary amounts of money on food can prevent you from saving the proper amount each month.
Try cutting your grocery bill by a third or even a fourth and saving that money instead. I know this may sound tough because you and your family need to eat, but when you really think about it, we tend to make a ton of impulse purchases along with convenience meals that eat up a quite a bit of money.
For example, if your family spends $500 per month on groceries and you decided to cut that by 30%, you’d free up at least $150 per month that could go to savings.
Housing and food are the two things we tend to spend the most money on. If I wasn’t able to control my housing costs and lower my family’s food budget down to $300 per month, I probably would have been too short on cash to pay significantly on my debt or save anything at my current income level.
You can buy more whole foods and ingredients to cook meals with, purchase seasonal produce, scour sales ads for deals and look up new tasty and filling recipes that you can prepare quickly and with ease.
4. Skip Your Annual Vacation
If you don’t have any back-up savings, you might want to forfeit your vacation for the year. According to Forbes, the average family spends $4,580 on summer vacation each year. What’s the point of going on vacation for a few days, then coming back to tons of bills and other expenses that you may not be able to handle? What if you or someone in your family gets sick or hurt while you’re out of town?
I went on a few vacations over the past few years and I always felt pretty broke and financially drained when I came back home. In an effort to get my finances in order, I opted to do a staycation this year in order to get a much needed break without all the travel expenses.
You can do this as well by setting a date to take a few days off to play tourist and enjoy the attractions and entertainment options available in your town and surrounding cities. Contribute money to your savings account just like you’re saving up for a big vacation only so you can spend a fraction of that for your staycation and put the remaining amount towards your savings goal.
5. Go on a Spending Diet
Sometimes the little things can make a big difference. If you want to set more aside for the unexpected to form a safety cushion, start cutting out little expenses that add up over time like takeout coffee, manicures, fast food, and other extras that you don’t need.
Empower yourself by saving that money instead and ignoring any temptations that come your way. Be sure to track your spending and maintain your budget so the money you save from your spending diet isn’t just being spent in another area of your budget instead. Monitor your accounts closely so you can set that money aside as soon as you generate the savings.
As you begin to build up your savings with extra money earned or ways you have trimmed your expenses, make sure to track the money you are able to put aside into your emergency savings. You will quickly see the small amounts saved add up into a sizable emergency fund.
Emergency savings can offer you peace-of-mind, help keep you out of debt and possibly save your life of the life of a loved one.