Budgeting is boring and sadly most people never stick with a budget plan. Old school personal finance tips all tell you to create a budget and stick to it and all of your money problems will be solved. If it were that easy, we’d all have a formal budget. But the reality is that only one out every three Americans creates a formal budget every month. Honestly, most of us hate to think about a budget and where we’d have to cut back.

So, we’re not going to tell you to build a formal budget but it is important to know how much money you have going out in bills every month and hopefully, how much is left over to put to use elsewhere. These essential living expenses must be automatically built in and allocated since they are recurring costs.

Emergency Fund

An emergency fund should be one of those items automatically built into your monthly plan. Stuff goes wrong in life. Cars break down. People get sick. You may lose your job. These all create stress and financial hardships. So, it makes sense to build up a rainy day or emergency fund to protect against these hits to your budget.

Most experts recommend that you should save 3-6 months of budgeted expenses in your emergency fund. So, if you have $1,500 of expenses every month, ideally your emergency savings fund would be $4,500 to $9,000. An emergency fund is designed to help you maintain your normal life through the emergencies that life throws at you!

Six Tips to Grow Your Emergency Fund

Anyone overwhelmed yet? When you do the calculations, it seems overwhelming (and impossible) to save that much money in an emergency fund. So we’d encourage you to take a small step and save $1,000 and then set small goals to keep working toward the grand total of three to six months of expenses saved. Remember the old adage, “How do you eat an elephant? One bite at a time.”

So here are six ideas that you can use to build up your rainy day fund.

1. Make it automatic – Instead of depositing your entire paycheck into your checking account, send a portion of it automatically to a money market account. Or set up a recurring transfer from your checking account into your emergency fund account each week or month. Once it’s out of sight, it’s out of mind. If you decide to save whatever you have left over at the end of the month, you’ll probably never save anything. So pay yourself first, just like you pay any other monthly bill.
2. Sell something – If you take a couple of hours to look around the house, you’ll be amazed at how many items (old kids’ toys, exercise equipment, dusty power tools, etc.) you could convert to cash. If you haven’t used it in over a year, you probably don’t need it and it could be valuable to someone else. It just takes a little time to post it online. Here are some ideas of where you can sell your stuff.
3. Get a second/seasonal job – None of us likes the thought of pulling extra hours when we’re already tired, much less being away from our families for that much longer. But even four weeks of an extra job can make a huge difference when you have an emergency.
4. Shop around for better auto & homeowners insurance – Visit websites of reputable providers, request a quote and make a switch if it makes sense for you.
5. Use a list for grocery shopping – Making a list will speed up shopping and help you stay focused on what you actually need. When you put less unnecessary stuff into your cart, you’ll reduce your monthly grocery bill.
6. Make small cuts – Look at your budget and do a bunch of little cuts that you won’t notice individually but add up significantly. Turn the thermostat up a degree or two, clip some coupons, and cancel unnecessary services or memberships. The results can be surprising!
7. Found money – When people come into a bit of unexpected money, they usually spend it without much thought. Instead of spending that “found money,” take some or all of it and immediately put it in your emergency fund. You didn’t have it before so you won’t miss it now.

Once you get an emergency savings fund that’s big enough, consider moving it to something like a Money Market Account or a Certificate Account. The account should be easily accessible, but not so accessible that you’ll be tempted to make withdrawals for everyday spending. That way, your emergency savings work for you and stays intact.

After the emergency fund, shift your focus to saving for retirement, college, or paying off the house. There’s always something you can do to position yourself for financial success and Members Trust is ready and willing to help. Contact us to see how we can help you reach your goals.