We all know it’s a good idea to have an emergency fund for those moments when unanticipated expenses pop up. That’s why experts typically recommended that you have at least three months (six months is even better!) worth of savings to cover your expenses just in case something unexpected happens like losing your job, needing to buy a last-minute plane ticket home, or unforeseen medical expenses.
But how do you save if you don’t have a lot of extra cash? If you’re still in school or if you’ve graduated and are paying off student loans (on top of other expenses), it might seem like a daunting task.
Don’t be discouraged! Small steps can make a huge difference in the long term. Here are some methods that the MPOWER team uses to save for those “uh oh” moments:
Budget, Budget, Budget
Budgeting is not glamorous, but if you do it right (and live within your means), you can put money in your savings account for emergencies, begin your student loan repayment, and still have cash left to live comfortably and have fun. Calculate how much you need for basic living expenses (rent, food, etc.) and to pay down student loan debt and other debt from credit cards, and then you’ll be able to see how much you have left for savings. It might not be a lot in the beginning, but that’s ok. We all need to start somewhere.
Automate Your Savings
It’s a lot easier to save if it’s done automatically for you. Set up recurring deposits from your checking account to your savings account every month – that way you don’t even have to think about it!
Don’t touch your emergency savings account for non-emergencies!
Once you start saving, it can be tempting to dip into your emergency savings account once in awhile. Don’t do it! Your emergency fund is for emergencies – nothing else. If you need some help with your self control, try separating your checking and savings accounts into different banks – the harder it is to access your savings account, the less tempted you’ll be to touch it.
Saving and building an emergency fund can be stressful – it’s all about finding a balance and spending within your means (while still enjoying your life, of course). But once you start and see your money grow, it can be comforting and satisfying.
Are there any savings tips that you use? Share them with us and check out the first blog post in our Healthy, Wealthy, and Wise series on the basics of student loans!