Creating an Emergency Fund

You’ve probably heard of this advice from countless financial wellness talks or articles that you will find on the internet. Having an emergency fund has a lot of established benefits and it will help you assert your financial stability. Here are some easy steps that you can follow to put yourself on a good start in creating and funding your emergency funds.

Have another Bank Account

If you use the same payroll bank account to save on your emergency funds, your chances of success are much lesser. You will find it difficult and tasking to be constantly calculating how much cash you can spend based on your account balance minus your supposed emergency funds value. It can also be tempting to use your emergency funds for purchases that may not be necessary since the amount is very accessible to you.

Analyze your Expenses

Take time to look at where the bulk of your cash is going. List down the usual tiny purchases that you make on a daily, and weekly basis and take a look at how it impacts your monthly budget. This step will give you an idea of how much your purchases are costing you monthly and will put you in a better position to decide how much you will need for an emergency fund and how much you can spare to fund it on a weekly and monthly basis.

Determine the Amount you need

Once you have analyzed your expenses you need to allot a certain amount of cash towards your emergency funds. Like any other task it would be easier and much more encouraging if you have a clear goal. In coming up with an emergency fund, you need to have a goal on how much you would want to save. Calculate your necessities and multiply it by 3. This should give you the ideal amount in your emergency fund.

Identify How much You can Spare

Once you have determined your goal, determine the pieces that will help you complete the goal. To do this you need to revisit your expenses and check how much extra you can spare and put to your bank account intended for your emergency funds. Some weeks you may have less and some weeks you may have more because you will also need to sync it with your other expenses intended for your necessities.

Start Funding

The most challenging part of the task and where most people fail is the step when you need  to start putting money into the account. Some people haggle with time with excuses such as “I’ll just delay it for another week” without noticing that a full year has passed without them accomplishing anything. When you start putting money into the account, leave it there. Do not constantly use it for purchases and sales and replacing it later on because this will set you back from your goals.

Preparedness is the key to business continuity and personal finance resilience in the face of challenging financial situations and unexpected events that will require you to sustain your living expenses from a different source.

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