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How to Start and Grow an Emergency Savings Fund

Jim is a hardworking family man. He manages to earn enough to keep the bills paid, and maybe have a little fun on the weekends. For the most part, Jim and his family are doing pretty well. Yes, they sometimes have to live tight in between paychecks, but so do millions of other people. He keeps plugging away and providing for his family. One day in early December – just before he was going to go out with his wife to buy Christmas presents for the kids – there is an emergency in the house. A busted water line is creating havoc. Jim is looking at a hefty repair bill, and right on the verge of the holiday shopping season. The worst part is that Jim doesn’t have an emergency savings fund started. He is going to have to scramble in order to get the water line fixed, and still be able to shop for the kids.money-problems_7-most-common-causes-of-divorce

This may sound like a bad situation, and it really is. Unfortunately, our fictional friend Jim is not all the different than the majority of Americans. Studies show that nearly 2/3 or American households do not have enough emergency cash set aside to deal with an emergency expense that would cost more than $500. That’s right, people are living on the cusp of bad things happening all the time, and most don’t have the money to deal with these expenses. If you don’t, it is high time to get started. Here are the steps you should follow to start and grow your emergency savings fund.

Decide How Much You Need to Save

No action in life worth taking is worth taking without a plan. You need to decide how much money you should have in your emergency savings fund. Old pros at the saving game sometimes have up to one year’s worth of their take home salary saved up. Others have up to three months’ worth of their monthly expenditures (mortgage, car payment, groceries, etc…) in their funds. These may seem like lofty goals. In the beginning, you should strive to at least have a month’s worth of your expenditures covered via your emergency fund. That way if the worst were to happen, and you lost your job, you would have at least a little bit of wiggle room to cover things while you get yourself sorted out. Calculate your average monthly household expenses and make that your goal.

Check Your Budget to See How Much You Can Contribute Each Month

Most people have some expenses in their budgets that they can cut back on or eliminate in order to start saving money. Maybe it is the expensive coffee, cigarettes or even cable TV bill that you can live without every month. Find these little expenses, and begin to cut back on them. Take every penny that you’d normally pay toward these expenses and add the cash to your savings. It takes a bit of work at first, but once you get used to doing this, you’ll find it easy to add money to your savings as a part of your routine.

Stay Consistent

Avoid the temptation to use your emergency fund as a fun money fund. If you must, start a separate, smaller savings account for non-emergency spending. Remember, though, that you want to get money for serious emergencies in the future, so stay consistent with socking money away, and avoid making impulse purchases.

Ideally, your emergency fund should be easy to get to in times of need. However, you can – and should – still seek to earn interest on the money. Check into a money market account that provides a debit card. These accounts typically earn more interest than regular savings accounts, and you can get ready access to your money during emergency situations. Before you know it, you’ll reach your first emergency savings account goal, and then you can move on to adding even more to it as time goes by.

The Most Common Money Problems that Americans Face

money-problems_7-most-common-causes-of-divorceSome people say, “More money, more problems.” Many of us, however, would contend that having less than enough money is enough of a problem as it is, and would love the opportunity to have more cash at hand for taking care of expenses and making purchases. Regardless of just how much money you make every year, though, you can take a bit of solace in knowing that many of the most common money problems you face are also issues for your fellow Americans.
But just what are the most common financial problems that people in this country face on a regular basis? It turns out that there are quite a few. With brevity in mind, however, let’s take a look at the list of the most common offenders.
Money Problem #1 – Not Enough Saving Going On
Chances are that at some point or another someone has told you how important it is to save for a rainy day. The problem is, however, that more than a few rainy days have hit our national economy over the past few years, and most people are tapped out in the savings department. Add to this the fact that many people (especially millennials) are not saving much money at all and you get a recipe for financial ruin. While many people may not have the ability to save much, making your savings an ongoing priority is a must – whether you are talking about being prepared for retirement or just making it through that next, proverbial rainy day.
Money Problem #2 – Making it from one Pay Day to the Next
With the price of living getting higher and higher by the day, it is no wonder that so many people have a hard time stretching their funds from one pay period until the next one arrives. A lot of Americans end up “Robbing Peter to pay Paul” and get caught up in a never ending cycle of never quite getting through from one payday until the next one arrives. Putting together a realistic budget – one that you stick to religiously – is the only way to get out of this cycle. You may have to make a few sacrifices – tighten up the belt, so to say – but in the end following a budget will allow you to avoid this all-too-common financial problem that plagues millions of people in this country every day.
Money Problem #3 – Ever Increasing Debt
If there is one financial problem that we would all do well to eliminate it would be the ongoing accumulation of consumer debt. It’s so easy for people to get approved for credit cards these days and then to go hog wild. The short term good feelings that come from making some purchases that you really can’t afford soon become a thing of the past when the ongoing yoke of consumer debt continues to mount up. The first step to getting out of debt is to avoid accruing any new debt. This might mean locking up the credit cards or even getting rid of them entirely. Slowly but surely you can escape the pain of ongoing consumer debt, and you will be very happy that you went without those expensive lines of credit when you are free and clear.
There you have it – a list of some of the most common financial problems that Americans face on a regular basis. If you can take action to get even these three financial problems under control, you’ll begin to feel more in control and will ultimately have more freedom to live the lifestyle of your choosing.