3 Easy Ways to Build an Emergency Savings Fund

 
CheatSheet
By Sheiresa Ngo May 06, 2016

Life rarely goes as planned, so it’s important to prepare for those moments when you need additional financial cushion. Establishing an emergency savings fund is essential to your financial health. An unexpected illness, job loss, or home repair could cause significant financial distress if you’re unprepared.

Saving money on a regular basis requires a great deal of discipline. However, the key is to rethink the way you approach building your rainy day fund. Instead of thinking of all the things you’ll be giving up, think of the fact that you’ll be preparing yourself for the unexpected. Having peace of mind is worth the temporary discomfort you may experience when you start tightening your budget.

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Financial planners generally recommend saving between 10% and 15% of your income and having roughly three to six months of expenses in reserve (others recommend six to 12 months). However, if you are not able to save that amount each pay period, get into the habit of socking away whatever you can. Even if you can only save $10 or $20 each week, set it aside. This way, once your financial situation improves, you’ll already be in the savings habit. In the meantime, practice frugal habits and watch your money grow. J.D. Roth, founder of Get Rich Slowly, advises against setting unrealistic savings goals so that you don’t get discouraged. Roth says it’s important to remember that it’s the small steps that will help you build wealth.

“Part of the problem is that we live in a society that idolizes the Big Winner,” he said. “Nobody celebrates the guy next door who bikes to work, grows his own food and cooks his own meals, shops at the thrift store, and gets all his books from the library. That sort of life isn’t glitzy. Yet it’s that sort of life that can (and does) lead to true wealth.”

2. Set up automatic savings

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