It’s easier to start saving when you have an end goal in your sights, like a new car or home. But, you might not be prepared for unforeseen circumstances in your life. Everyone should have an emergency fund in case their lives take an unexpected turn. How would your life be impacted if you lost your job, or needed to pay for a healthcare emergency? If you haven’t got a large enough stash to get you through either scenario, use these 4 tips to reboot your financial plan.
1. Set up a Separate Savings Account
It’s a good idea to separate your savings from your current account so that you won’t be tempted to spend. To make the most of your money you can deposit it into a high yield savings account so you can earn interest. Just make sure you opt for an account that requires zero minimum balance, in case life happens, and you need to drain the account. Synchrony Bank, Barclays, and online bank Ally all offer a savings account with an APY of 1.30% with a minimum balance of $1.
2. Track Your Spending
To properly grow an emergency fund, you’ll need to figure out exactly how much you spend each month. Then, you can start to save 3-6 months’ worth of living costs as a safety net. Include all of your outgoings like rent or mortgage, health insurance, car payments, utility bills, grocery shopping etc.
Also, by tracking your spending you’ll be able to find areas where you can cut back. Look at your eating out and shopping habits as these are common places that people can usually find money that they can save. Use a notebook, or download an app like Mint to do the work for you. It’ll automatically categorize and analyze your spending patterns.