We all know that life is totally unpredictable and anything can happen. Most of us try to plan ahead and foresee their future needs and expenses, but still there are things which happen suddenly and there’s nothing you can do about it. You never know if you will need money for an urgent car repair, you may lose your phone or get a bill which has to be paid urgently.
Financial experts insist that every person who wants to create personal financial well-being should have an emergency fund. However, it’s important to understand the difference between an emergency fund and rainy day savings. Feeling curious?
Rainy Day vs. Emergency
Most financial experts say that rainy day savings is the money which can help you to fix unexpected problem or to help you to stay afloat within a few days. In other words, this money can’t provide you during a long term. Emergency fund is intended to help you to make ends meet in case of a serious life change.
According to a perfect scenario, emergency savings should be enough for you to cover all your living expenses within 3-4 months. But for sure – the more money you have, the more confident and protected you feel yourself.
Start Keeping a Track of Expenses
To build an emergency fund it’s necessary to understand one thing: the less money you spend the more you can add to your savings. That’s why it’s time to start counting your money. Write down all the purchases you make within a month, so in the end of it you’ll be able to analyze your spending. It allows you to understand how much you spend on your wants and on your needs and which expenses you can easily avoid.
Get Ready for Lifestyle Changes
Ask yourself some questions and be honest in your answers. For example, do you really need a cable TV? Can you do something to pay less for it? Can you refuse eating out with friends? Do you really need getting Starbucks coffee every morning? Think of all the payments you make regularly and contact service providers to see if you can reduce your expenses. Even a small change can lead to impressive results! Start respecting your money and do your best to stop throwing it on unnecessary things.
Choose the Right Place for Your Savings
The next step is to decide where to keep your savings. Keeping it at home is risky because when you have an easy access to the money you can use it for any other reason which is not an emergency. It’s better to put your money in the bank where it’s safe and you can benefit from your deposit.
Make More Money
Understand that having an emergency fund will make you feel independent. For example, if you’re facing unforeseen business costs then instead of taking out a short-term business loan you can use your own money. Focus on boosting your income and consider different ways for doing that. Think of your skills – maybe you can get a part-time job? Surf the Internet. Fortunately, there’s a variety of online jobs which can be become a source of basic or additional income.
Change Your Way of Thinking
Most likely the answer is “no”. Start using your time effectively, it should bring you money. Learn to think like a potential millionaire and sell all the things you don’t need, start make money on space you don’t use.
Just take a look around and you’ll see that people looking for opportunities find them sooner or later.