Setting Up an Emergency Fund in 2018

Last updated on: October 17, 2017 at 7:00 am by Guest Contributor

Setting Up an Emergency Fund in 2018 2017-10-17T07:00:36-08:00 Guest Contributor

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2018 is right around the corner. That means you need to be prepared for it. You never know what next year will have in store for you, and it is important to plan ahead. With a little bit of determination, you can have a nice emergency fund saved up throughout 2018 and going forward. The below tips are designed to help you get started.

If you do not have an emergency fund, you are not alone. In fact, most people do not have an emergency fund, and many people with a fund do not have more than a couple of hundred dollars in it. If you are a part of the larger group without an emergency fund, it’s not smart to continue that way.

An emergency fund can help you when you truly need it, and it offers security for you and your family’s health. For example, think about your child knocking out his or her tooth. If you live paycheck to paycheck, then a $500 dental bill is not something you can afford. Ideally, if you saved up $1,000 in your emergency fund over time, then of course, the incident wouldn’t break your wallet.

That’s a picture perfect example, but it doesn’t take away from the fact that having emergency savings set aside is extremely helpful.

Automate Savings with Direct Deposit

One of the hardest things to do is save money when you have bills to pay. Financial obligations often require you to devote the majority of cash to bills, then afterwards, you might be tempted to spend the remainder on something more fun. This is where many people slip up when it comes to saving for an emergency fund.

One way to overcome this is to set up automated direct deposits, so your paychecks go to your accounts directly, including your emergency fund. If you have direct deposit through your employer, choose to send a percentage of your check every pay day to the emergency fund. This way, the money is already removed from your check and you won’t miss it, so to speak.

Make an Off-Limits Account

For the above to work, you would need to have a separate account for your emergency savings. Ideally, you wouldn’t have easy access to the account either. You’ll find it harder to save money if you have a debit card linked to your emergency fund. You should consider setting up an account without a linked debit card, and you could even require multiple steps make a withdrawal. This way, it’s inconvenient to dip into your savings, and you’ll only be incentivized to do so during an actual emergency.

Once you have the account in place, you can designate the percentage from your paycheck to go to this account. In addition, you could also easily make transfers from one bank account to another. If you have a cheap week, maybe you can devote an extra $100 to the account.

Use Expense Trackers to Your Advantage

An expense tracker is one tool that you can use to your advantage. There are plenty of tracker apps out there, and you will need to choose one that meets your needs. With an expense tracker, you should be able to see where you put your money and where you can slim down certain spending. Overall, these apps are a great tool to help you take control of your daily personal finances.

For example, if you notice that you eat out three times a week for $40, then you can make a point to shop at the grocery store and replace those three meals for $10 with wholesome foods. The expense tracker would quantify this for you in a simple way, and it can provide you with a clear objective to improve your budget. Look at your expenses for the month and find anywhere and everywhere that you are able to cut and make sure to do it.

Talk to a Financial Advisor

A financial advisor is someone who can provide you with tips on what to do to save money. They will look at your finances as a whole and provide you with expert recommendations on how to cut back on expenses. If you pick the right help, then you could save more money with expert advice.

In addition, your financial advisor will be able to work with you to invest your money. They know what the conservative and risky options are, and they will advise you on where to place your money based on your needs. If you cannot afford a financial advisor, an alternative could be a robo-advisor. These offer some of the same benefits as a traditional advisor such as investment allocation, goal setting, and tax planning.

Final Thoughts

The hard part is saving up the money in the first place for an emergency fund. Once you have one in place, you will wonder why you waited so long – trust me.

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