Simple Steps To Setup An Emergency Fund
An overshooting monthly expense without a backup plan for support can leave you stranded with financial stress. People who come across such situations are often forced to ask for help from people within close circles. They might also try some other options like getting a bank overdraft, borrowing from a pawn broker or taking a payday advance loan from their employer or from a payday loan lender.
What if they had a backup?
Nothing beats the peace that an emergency fund ready at hand can offer a family. You might use the money when an emergency strikes or most probably be saved from such situations, however it is always important to be prepared to meet the worst case scenario. Here are a few tips for you to start saving.
Safeguard from over-spending by devising a budget plan:
Before you start thinking about saving money on a monthly basis sit down and make a list of all the monthly expenses incurred by the family. Cover all the little details that come to your mind and make sure that you aren’t ignoring any. The basic idea here is to have a written plan ready to meet all the household expenses and to be sure of what actually is going out of your wallet. This will help you practice organised spending for the family.
How much to save:
A lot of people ask question about the amount of money that will have to be saved in a month for emergency purposes. Well, the right answer to this is how much ever you can. Nobody really can do this for you, ideally you will be the best person to decide on your own about how much to save in a month. The amount of money that goes into your savings might be little but consider it is going to grow bigger in the coming months. Once you have decided on how much to save in a month stick to the plan.
How much cash to have in reserve?
Well a lot of financial advisers might come-up with different suggestions on the amount to be put aside. The debate concerning savings has always been around three to eight months of your monthly take home salary. However, no matter what you plan it would be better to remember that it is always good to save as much as you can to ensure a good backup reserve. A minimal reserve amount should match your payday advance loans eligibility.
Have an emergency fund account setup:
Now that you are clear of your goals on saving money, its time for you to think about where exactly to save it. If you have it at home the chances of you spending it is quite high. The best way to save for an emergency fund is by setting up a mutual fund account or a savings account. By doing so you could also enjoy the privilege of getting higher interest on your saved money. And another vital reason why you shouldn’t be saving money at home is to avoid loss through fire or robbery.
And anyway a penny saved is always a penny earned, so it is not a bad idea to start saving from today. When the need for immediate cash arises the funds saved for emergencies will be of great help to you. However, it is also crucial to make it a habit to review your savings plan every year. Find out where all the money has been pumped in. Stay up-to-date about how much you spend every month. And do not panic if you have no funds in reserve as you could always borrow money from friends, relatives or even take payday advance loans.
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