How to Save Money for Unexpected Expenses
Unexpected expenses can happen to anyone at any time. Your car may have broken down or there may be roof leaks that should be fixed at the earliest. Do you have the cash required to deal with such unexpected expenses? If not then you will have to use your credit card or apply for loans to take care of the emergencies, which means more debt. This makes it important that you start saving before such emergency hits you.
Saving money for emergency is a part of a healthy personal financial situation. The basic rule of saving for crisis is to have enough cash to pay your bills and other basic expenses, at least for a few months. Before you start saving there are a few things that you need to consider, which includes-
- Whether you are single or raising a family
- How much you earn
- If your job is secure and
- If you qualify for Employment Insurance (EI)
Though unexpected expenses cannot be predicted, you can at least presuppose the kind of expenses that you should plan for. You may face financial emergencies due to different reasons. To stay prepared, you need to first make a budget plan. If you do not plan for them in advance, it can knock your finances off track. Following a few simple steps will help you get enough money to sort out your unanticipated needs.
Start Identifying Possible Unexpected Expenses
Getting high cost loans during emergency situation often results into debt. When you have enough saving it can be a good buffer during your rainy days. Before you start saving try to identify the possible unexpected expenses. Prepare a list of some common seasonal expenses such as car insurance, property taxes, car insurance, Christmas gifts, birthday presents, car repairs, home renovation, hospital bills, and so on.
Putting aside money can seem to be a difficult habit at first. But as you start saving it will give you peace of mind and you will not have to panic during any emergency situation.
How Much Saving Is Enough?
Most experts recommend that you should have enough saving that will help you and your family to live on up to at least 8 months. If you are single, saving for four months should be enough. You should keep in mind that you must have enough saving to just cover your day today expenses such as food, monthly bills and hospital expenses and not luxuries such as dinning out or holidaying.
Create A Saving Plan
Once you have figured out how much cash you should save every month, set up a plan that will help you in achieving your monthly goal. Creating a wise financial management will provide security as well as promote your well-being. Most of the people today are unable to save as their goal seems massive. In such case, one should start by targeting low that is within their reach. Even a small amount can make an enormous difference during an emergency. Putting aside even a small amount every month will create a significant reserve for any unexpected expenses.
Stay Stick To Your Saving Plan
To stay stick to your plan you can opt for automatic monthly transfer, just like you do with your monthly electricity bills or phone bills. This will make you feel like making a bill-pay transaction. Once you have saved enough, you are likely to get tempted to spend it on something else, such as on costly mobile phone or clothes. Before you make any such nonessential purchase, consider what your actual goals are and if by making such purchase you will move toward or further away from your goals. Try to resist such temptation and avoid checking your balance until you are actually facing any emergency.
Where To Save?
A saving account away from your usual checking account is the best place to save money for unexpected expenses. It will ensure you are not tempted to make withdrawals. Some other possibilities include money market funds, certificates of deposit or credit unions. Utilizing several locations including your home lockbox all at once is the most beneficial option. Start early with your saving plan so that you can tide over any financial difficult in the most stress free way.