If you went into 2020 with an emergency savings fund, you’re probably grateful that you had spare cash on hand in the middle of an economic crisis. You also probably don’t have much of an emergency savings fund anymore.
And if you went into 2020 without an emergency savings fund, you probably would have had an easier time of things – or, at the very least, greater peace of mind – if you’d had an emergency fund to draw from.
That reality is reflected in a recent survey from Bankrate, which found that respondents’ top regret in 2021 is not having enough saved for an emergency. Focusing more on emergency saving is also the most popular change Americans will be looking to make coming out of the Covid-19 pandemic, according to that same survey.
Of course, the best time to save for an emergency is when things are going well, but unfortunately you can’t wait for the perfect circumstances. If you’re on the other side of a disaster and you have enough income to cover all your necessities, here are a few simple ways to start building an emergency savings fund.
Automate your savings
It’s substantially easier to save money you never really had. Rather than manually moving money from your checking account into a savings account, set up an automatic deposit.
If you can get your employer to automatically deposit a small portion of each paycheck into a savings account, do it. If that’s not available, do the next best thing and set up an automated payment from wherever your paycheck hits to your savings account.
By bypassing your checking account, you don’t have an opportunity to think of other ways to use that money. It doesn’t belong to you – it belongs to your savings account, and you can’t miss it if you never had it.
Most experts suggest that you should have six months’ of living expenses saved up for a worst case scenario. That’s a lot of money! It can be overwhelming and discouraging to think about the kind of sacrifice and hard work it takes to save that much money.
But one dollar in savings in more than no dollars in saving. Don’t think that you have to hit your goals immediately. Start with what you can manage. The only rule is that you’ll always save something. It could be as little as one dollar a paycheck, as long as you’re building a savings habit.
Always pay yourself
While you may want to start small, you should always be looking for opportunities to comfortably increase your savings contributions. Get a raise? Save more. Boss thanked you with a big gift card? Put half value of the gift card into savings. Expecting a tax return? How much can you put into savings?
It’s important – and really helpful – to think of these contributions as what they are: payments to your future self. It’s not money that you’re denying yourself today – it’s money that you’re giving yourself tomorrow.
Reduce expenses where possible
You can’t just snap your fingers and pay less in rent. You might be able to refinance your car loan, but that can be costly. You have to eat. You need gas to get to work.
Reducing your expenses is a great way to open up money for your savings fund, but it’s often easier said than done. That said, it’s still worth the effort to review your spending and see if there are any obvious issues. If credit card payments are a major line item, talk to an NFCC-certified credit counselor for personalized recommendations on how to shed debt quickly.
Remember that your savings fund is fluid
You may be aiming for a savings account that equals six months’ worth of living expenses, but real life isn’t necessarily going to wait for you to hit that target. In truth, your savings fund will likely be in flux as small emergencies and occasional windfalls pop up.
Never feel bad for dipping into your emergency savings fund to help weather unexpected setbacks. Just stay committed to saving. The more you save the save, the easier it becomes to manage the various disasters (small and large) that happen to all of us. Your future self will appreciate the hard work.