The existence of a healthy emergency fund is absolutely paramount for any adult. Unexpected expenses and occurrences happen all the time, often when people least expect them. A plentiful emergency fund can, and often does, determine whether or not an individual or family is ruined by financial hardship or able to foot the unexpected bill.
Despite the importance of an emergency fund, not everyone has one. One of the most common reasons is a tight budget. Of course, saving money is critical, but how does one go about doing so when they're living on a tight budget. Thankfully, there are various strategies which can be used to create an emergency fund, regardless of one's budget.
Build in Moderation
Many people believe that they can only build an emergency fund by putting aside large sums of money. However, this is not necessarily true. Emergency funds can be built slowly and moderately --- and should be for individuals who are on a tight budget. Putting aside $20, $10, or even $5 per week may not seem like much money, but with time and consistency, it will add up fairly quickly.
Reduce Expenses, Increase Revenue
The creation of a healthy emergency fund will inevitably require changes in money management. These changes will involve the reduction of expenses and an increase in revenue. It goes without saying that the more money one has, the more they can put towards their emergency fund. Reducing expenses and increasing revenue will also gradually allow people to put aside larger amounts of funds. Many working individuals have a tendency to consume in greater amounts when their profits increase. However, discipline is certainly required in the process of building an emergency fund.
Set Specific Goals
Believe it or not, having a specific goal in mind can simplify the process of achievement. In the case of establishing an emergency fund, having a specific dollar amount in mind for one's emergency fund can make a nice difference. Generally, experts advise people to have three to six months worth of living expenses in savings. The amount of time required to establish this amount will depend on a variety of factors. However, each bit of money which is placed towards the emergency fund will ultimately make a difference.
A Final Word
Timing is a huge factor in the creation of an emergency fund. In most cases, the earlier one starts, the better. Even young college students can begin creating their own savings by putting modest amounts of money aside. Building an emergency fund also requires discipline. The temptation to spend money is everywhere; those who constantly dig into their savings in order to fulfill their desire for instant gratification will inevitably find themselves out of funds when a true emergency arises.
Authored by Gabrielle Renee Seunagal