An emergency stash of savings is a must for heading off financial rainy days but if you don’t have one yet, you’re not alone. A Bankrate survey published earlier this year found that just 38% of Americans are equipped to handle the occasional money mishap, such as a car repair or an unexpected visit to the doctor.
Experts recommend having three to six months’ worth of expenses tucked away for emergencies but that can be a daunting goal to work towards when you’re starting from zero. Aiming for $500 or $1,000 instead is less intimidating and it can be done in a relatively short period of time. If you’re ready to jumpstart your savings, here are four tips for establishing a decent cash cushion in under a month.
1. Trim the fat
Coming up with the money to build your emergency fund may be easier than you think. In fact, it could be right under your nose but you have to be willing to look for it.
Your first stop for finding the cash is your monthly budget. If you’re not using a budget to track your income and spending, you need to get one pronto. The Internet is full of free and inexpensive budgeting spreadsheets you can use or you can always let an app like Mint do the work for you.
When you’re looking at your budget, take a look at the most obvious places you can cut back on first. For example, do you really need to spend $150 a month on that deluxe cable package when you rarely watch TV? Can you eat at home every night instead of going out?
Once you’ve eliminated non-essentials, go back a second time and look at those expenses that are more or less fixed to see if it’s possible to whittle them down.
For example, you may be able to score a better deal on your car insurance by moving to a different insurer.
When you’re in debt, making it less expensive can free up some extra cash you can put towards your emergency fund. If you’ve got student loans, consider refinancing them, which can reduce your rate and your monthly payment. Refinancing your mortgage is another option if you think you can get a better rate.
Finally, skim your budget for those sneaky smaller expenses that drain away extra money you could be saving. That includes things like magazine subscriptions, banking fees and recurring charges for “trial” subscriptions that have expired. Since your goal is to get an emergency fund together in 30 days or less, you need to be as ruthless with your budget as possible.
2. Boost your income
Cutting back on what you’re spending is a step in the right direction towards building your emergency fund but it shouldn’t be your only focus. Taking action to increase the amount of money you’re making over the next month is another important part of the puzzle.
So how do you go about beefing up your paycheck? For starters, you could ask for a raise. Whether or not you’ll be successful, however, really depends on how long you’ve been at your job, what your track record is and what your employer’s policy is on raises.
A less challenging option is to simply step up the number of hours you’re working. Keep in mind, however, that this only works if you’re paid by the hour versus being a salaried employee. In that case, you’d need to look into a part-time job to bring in a few extra bucks.
Starting a side hustle is an alternative way to make extra money if your schedule won’t allow you to work a part-time on top of your regular gig. A side hustle could be anything from walking dogs to babysitting to freelancing online and you can cater your hours to your schedule. Just remember that once you hit $400 in earnings from your side gig you’ll have to pay taxes on the money you’re making.
Finally, you could look into selling your extra stuff to make a few bucks for your emergency fund. Listing items for sale on eBay requires paying a small fee but it can be worth it if you’ve got a lot of stuff you want to unload. If you’re not that tech-savvy, a good old-fashioned yard sale can just as easily do the trick.
3. Keep your emergency fund separate
Streamlining your budget or making more money won’t do you any good if you’re not committed to saving the extra cash you’ve got coming in. Setting up a separate savings account is a must if you want to see your emergency fund grow over the next 30 days.
There are lots of different savings vehicles out there and you need to know how they differ to make sure you’re choosing the right one. A certificate of deposit, for example, may come with a higher interest rate than a regular savings account but you won’t be able to get to the money until the CD matures. That can be a major drawback if an emergency does come up.
Ideally, you want to keep your savings in an account that offers convenient access and a decent interest rate. For that, you should look at opening a savings account online.
Online banks have fewer overhead costs than the brick-and-mortar versions which means they can afford to pay their customers more in interest. Just be sure to review the fees carefully so you know exactly what the account is going to cost you.
4. Put your savings on autopilot
Saving money is a habit and like any habit, it takes time to develop. Automating your savings makes it a little easier to get used to. Scheduling automatic transfers to your savings account on a weekly or biweekly basis also ensures that you don’t have a chance to spend the extra money in your budget.
Another easy way to trick yourself into saving is to just round up every transaction you make with your debit card. If you spend $35.47 at the grocery store, for example, round up and sweep the extra $0.53 into your savings account. It’s like having a virtual change jar and you might be surprised at how quickly it adds up by the end of the month.
The Bottom Line
An emergency fund is a financial insurance policy of sorts and the sooner you get one, the better. Saving a $1,000 or so in 30 days or less is a reasonable goal that just about anyone can achieve. The key is to be creative about finding the money and committed to saving it. Once the month is up, you should be well on your way to building up an even bigger savings buffer.
