An emergency savings fund is an essential piece to any person’s financial puzzle, but a 2018 CNBC study found that only 39% of Americans have enough savings to cover the cost of a $1,000 emergency. Be it a broken water heater during the dead of winter or an unexpected trip to the hospital, a startling portion of the American population finds themselves unable to afford any unplanned financial hiccups.
The value of building your emergency savings fund may not show itself until an emergency occurs, but you’ll be grateful for it the moment you’re hit with an expensive, unexpected bill. But the big question is how do you start building, and what tactics can you use to enhance your emergency savings fund? Let’s break it down.
Building & Enhancing your Emergency Fund
Dividing your direct deposit
Starting your emergency fund is as easy as setting aside a particular portion of your direct deposit income into a savings account. Typically when you open a checking account, you also open a savings account—this applies to most popular banks.
Of course, you need to prioritize squaring away your bills and other demanding financial responsibilities, but you should make it a second priority to dedicate a slice of your income toward your emergency fund. Think of it as paying yourself!
Get professional tax help
Tax season comes around once a year, and when you’re not a seasoned tax vet or a knowledgeable tax wiz, it can feel overwhelming knowing that a single mistake could have the IRS on your back.
Tax mistakes are among the priciest errors you can make when it comes to mere pen and paper. Sometimes admitting ignorance can be tough, but when you’re dealing with something as serious as federal and state taxes, you won’t want to have any slip-ups that could earn you a hefty tax bill or scrambling to find immediate tax lien help.
Seeking out professional tax help ahead of the April 15th tax deadline date will ensure that your taxes are in good hands. Not only will you get the highest return possible, but your audit fears can be laid to rest.
Everyone loves to claim that certain things are out of their budget, but the likelihood of them knowing precisely what their budget looks like is low. Figuring out your budget takes careful assessment of a number of elements.
The easiest way to get started is to take your monthly income and subtract your monthly outgoing costs (rent, lease payments, student loan bills, groceries, etc.). Consider the rest of your money to be disposable income. Put half of it into savings, and the rest toward your lifestyle. This might require some seriously frugal living, but if you’re serious about building an emergency fund, certain fun sacrifices must be made.
Secure a side hustle
Navigating the waters of a side hustle can be difficult, especially when you’re first venturing into it. Whether you’re after a freelance writing side career or want to dedicate weeknights to driving for Lyft or Uber, that extra cash flow will help enhance your already established income. And who doesn’t love having extra money?
You could even put all of that side hustle money directly into your emergency fund so you can build faster. Be sure to assess your current schedule before committing to a side hustle that is too involved and ends up being more overwhelming than it’s worth. Remember, your sanity should come first—don’t spread yourself too thin!
Look for good benefits
When looking for a new job, be sure to ask about the benefits offered by your potential employer. Whether you’re looking for a part-time gig or a full-time career, you should prioritize companies that provide quality health insurance, life insurance, 401k matching, and more. Make your job work for you by narrowing your search down to positions that give back.
The process of constructing and enhancing your emergency savings may not be a fun or attractive one, but in a few months’ time, you’ll feel more financially secure than you ever have before. No one wants to plan for an emergency, but the reality is that they happen, and when they do, you’ll want to be prepared!