Few women get through life without experiencing some sort of financial emergency. Maybe you won’t ever go through a natural disaster like an earthquake, hurricane, tornado, etc but when you’re budget is figured down to the last cent and there’s no wiggle room, something like an unexpected car repair or broken water heater can cause lots of stress and be hard to deal with. When you aren’t prepared for unexpected financial emergencies it can send your finances into a tailspin.
Lots of time women (actually all people can probably be found guilty of this, not just women!) will have a credit card that they rely on in times of emergencies. But keep in mind this isn’t a wise decision as a credit card comes with a high cost. The payments you’ll have to make will go on for years and then there’s the interest. Instead, you should try to save up money for an emergency fund so that you are better equipped to handle whatever life throws your way without using a credit card for those emergencies.
You might think that it’s impossible to build up an emergency fund. But it’s not. It is recommended that you save up enough money to cover 3-6 months worth of income. While that may seem like a daunting task (and it takes most people 1-2 years to save this up) you should focus instead, on getting whatever you can saved. This way when an emergency pops up, you’ll have something in the bank to work with. Here are several different tips to help you build your emergency fund quickly.
1. Entertainment expenses. This will probably be a huge reality check when you sit down and figure out how much you spend on going out to eat that’s why it’s recommended to start here. Most women don’t even realize how much they spend monthly on eating out. There’s often a lot of money that can be saved when you’re aware of how much you’re spending on eating out and stop doing it so frequently. Next you should look at your cable bill – do you really need all those movie channels?
Don’t think that you have to give up entertainment altogether because you don’t. You just need to be aware of what you’re spending on entertainment and cut back as much as possible. The money you save from cutting back on different entertainment expenses can be put into building your emergency fund.
2. Brown bag lunch. Instead of eating out with everyone at the office, start packing your lunch. Sure it may not seem like spending $10 on lunch here and there is a lot but if you add it up over the course of a month you’d probably be surprised to see how much you’re really spending. Again, the money you save by cutting back here can be added to your emergency fund. Not only is this a good financial decision, it’s a healthy decision too because you’ll probably eat better if you pack your own lunch!
3. Phone plan. Check out your cell phone plan and see how many minutes and text messages you’re using every month. Do you have a lot of extra minutes? Do you hardly use any text messages? If so, you should check with your provider about dropping down to a less expensive plan with less minutes/text messages. Another good idea is to check with other service providers and see what they are offering. Often times you can find a better deal than what you’re getting.
4. Allocate savings amount. The next thing you need to do, after you’ve trimmed your budget in all the areas you can, is decide the amount you are going to save and put towards your emergency fund. It’s important that you treat this like a bill that has to be paid on a certain day of the month. The reason behind doing that is so that you won’t give into temptation and spend that money.
5. Garage sale or eBay. This is a great way to not only get rid of unwanted/unneeded items around your house but to also raise some cash. Keep in mind that this money should be put into your emergency fund!
Not only will having an emergency fund help reduce your stress when life throws that unexpected car repair or broken hot water heater (or whatever it may be) your way, it will help you keep your finances from going into a tailspin by having to ‘rob Peter to pay Paul’. If you already have an emergency fund in place – good for you! If you don’t, what are you waiting for? Get started now!
photo credit kayaker1204
Andrea is the Chief Chick of Smart Money Chicks. After filing BK twice (once because she panicked, second time because the pro messed the first time up), she realized that it all could have been avoided if she understood more about how her Finances worked and the options available. At that point, she wanted to help as many as she could never make the same mistakes again. Our Promise is that all the content you read on here is created or edited by Andrea
Great tips, especially the one about watching your entertainment budget. I’ve done pretty good about that so far, but it is really tempting to backslide.