How to Establish Emergency Savings During Market Uncertainty
After a referendum referred to as “Brexit was held on June 23rd 2016 to decide whether the UK should leave or remain in the European Union, “Leave” won by 52% to 48%. Wall Street and global markets sustained major plunges. Ups and downs in the economic and industry cycles are unavoidable, and with 47% of Americans admitting they have little to no savings, there is no better time than now to establish and build an emergency fund.
Nothing can prepare you for a recession or layoff, but money to cover your expenses can help lessen the blow to your budget! Here are 6 tips for creating a cushion to give you peace of mind in these unpredictable times.
- Track living expenses.
If you don’t know how much you spend each month on the necessities, you can’t plan accordingly. Track your spending for one to three months (use an app like Mint for help) to determine how much money goes toward essentials like mortgage or rent, insurance, food, transportation and utilities. Estimate the monthly average and multiply it by six or nine; this will give you the amount of cash you need to cover your bills for six to nine months.
- Set a savings goal and plan.
Stashing away extra cash for living expenses will take time. In fact, you may feel discouraged after calculating the total amount you’d like to put aside, since it may seem like an impossible goal. To combat this, devise a savings plan with specific steps to help you reach that target figure, which may include cutting back on Saturday night dinner dates and saving a set amount of money each month.
- Treat emergency funds as a bill.
When you’re saving for an emergency fund, the goal may be hard to stick to without looming due dates, interest rates or late fees forcing you to pay up. Since there’s no immediate or obvious repercussion for missing your savings goal each month, it’s important to treat it like a bill. Better yet, automate the savings by setting up a weekly or monthly transfer of funds between your checking account and the emergency fund.
- Slash everyday expenses.
Look for ways to slash your everyday expenses so you can reach your goal faster. For example, you can carpool or take public transportation to cut down on fuel costs. Instead of relying on takeout during the week, prep meals on the weekends and freeze them for quick access on weeknights. You can also try budget hacking, or the process of reducing your fixed expenses by calling up providers and requesting discounts or reduced payments on such things as car insurance, mobile plan costs and cable TV.
- Get savvier with spending.