Tips For An Emergency Fund
One of the more common reasons why individuals borrow money is because they are faced with expenses that they have no way to pay for. The consequences of not paying some bills or of paying those bills late can be tough to bear, so the clear answer is to borrow money from a credit card cash advance, a title loan or another form of fast cash. If you are like many other people, you may blame unexpected expenses for this type of financial predicament. However, when you think about it, these expenses are not actually unexpected. Everyone runs into situations that result in extra expenses from time to time. While you may not know what those situations will be or when they will occur, you know that unplanned events will happen numerous times throughout your life. The purpose of an emergency fund is to provide you with the financial means to pay for expenses associated with these situations.
Choose the Right Savings Account
If you do not already have an emergency fund, it is important to choose your savings account wisely. Even if you already have a small fund established, it makes sense to review the account and to determine if it is the right type of account to use for this purpose. The money should be easily accessible, but it ideally will not be immediately accessible. For example, if the savings account is with the same bank that your checking account is with, you may easily draw from that account for non-emergency situations. This can make it challenging to build a healthy sum of money in your savings account. You may even use an online bank for this purpose so that you can access the money in a day or two when it is needed.
Many people are not actively saving money because they feel as though they do not have enough money to do so. Remember that having any money in an emergency fund is better than having none at all. Adjust your budget slightly so that you can afford to save $10 to $20 per month. Saving this amount weekly is even better. You may simply adjust the foods that you buy at the grocery store or avoid eating out so frequently to find the money that you need to save.
Schedule Automatic Transfers
One of the most important steps that you should take to ensure that your account balances increases over time is to create automatic funds transfers. Set up a recurring transfer so that a small amount of money is transferred on a regular basis. The ideal days for this type of transfer are the days after you expect your paycheck to be deposited in your account.
Save Large Windfalls
You will notice that your emergency fund balance grows slowly over time with automatic transfers. You can also save large windfalls, such as from a holiday bonus or a tax refund. By doing so, you will see your available balance in your emergency fund increase dramatically.
Have a Goal
Many people wonder how much money they need to have in an emergency fund. There are a few strategies to consider. One strategy involves having enough money to pay for three to six months of your expenses available in the fund so that you can pay for expenses in the event of a job loss. However, this is not the only type of financial situation that you may be in. It is also helpful to save enough money to pay for your home insurance deductible and for your deductibles on your health and auto insurance policies. After all, if you have to take time off of work for an auto accident, you will lose wages, have more medical bills and be required to pay your auto insurance deductible. You can see that expenses can add up quickly.
Know When to Use It
It is also important to know when to tap into this fund. Before you make a withdrawal, ask yourself if this is truly an emergency. Does the money legitimately and urgently need to be spent? What are the consequences of not paying the expenses in question? Are there other sources of funds available?
You can see that an emergency fund can benefit you tremendously. However, you also need to have a financial plan if you run into expenses before your account is properly funded. Applying for a short-term auto title loan is a smart way to pay for unexpected expenses without taking on long-term debt.