Unexpected financial drains are the worst, aren’t they? Just when you’ve seemed to straighten out debt, put away money for savings and stuck to your personal budget, something occurs that leads you to breaking into your emergency fund, which is never a good place to be. However, that’s why you’ve got it, right, because the future, especially financially, is always uncertain.
While we’re always talking about the importance of having a reserve of money socked away for lean times, when it comes saving and managing money for it, it can become a whole different beast that you don’t even remotely feel like messing with.
If you don’t start one or you don’t save, when financial hardship hits, you realize you made a huge, massive, big mistake, and you’re one click away from posting a GoFund Me page. To avoid the headache, hassle, humility and stress, check out these FAQs about having a source of emergency income, as well as the best ways to start saving now.
Question: Should I Have One Even If I’m Paying Down Debt?
Answer: Absolutely. While it may feel like you’re already stretching your paycheck to the max, finding small pockets of money to put in your emergency fund are vital. It can take months, and in some cases years, to pay off a debt, and if you don’t have emergency money to fall back on, you’re just setting yourself up for more debt. You have to expect that something is going to happen during that time of repayment, which will dig your debt hole deeper because, suddenly, you have to put $1,000 back on the credit card you were close to paying off.
Question: How Much Should I Have Saved?
Answer: Most emergency funds fall somewhere between three and nine months of living expenses. If you’re suddenly freaking out over the impossible idea of saving that much money, look at your bare bones necessities. Rent, transportation to work, and food is what you need to put money aside for. Don’t save for the lifestyle you’re currently living, save for what will keep you going during a money emergency. Of course, more money is better, but having basic security set aside is actually a huge stress reliever.
Question: Can My Emergency Fund Be An Asset I Own?
Answer: In short, it’s not recommended. Yes, owning something valuable that’s easy to resell does lend a sense of security, however, not having liquid assets ready at a moments notice isn’t an awesome plan. You want immediate access to money in a financial emergency, and depending on what you have to throw up on ebay or drive around to pawn shops, chances are, you’ll be selling yourself short on the true value of your belonging and risk low returns on stock investments when you have to sell during a market downturn.
Question: Where Should I Keep My Emergency Fund?
Answer: No need to put your emergency funds behind glass, a basic, everyday savings account will do just fine to keep your money on lock. If possible, it never hurts to have $50-$100 in cash hidden at home for smaller urgent matters that need instant green. If you can’t even do that, don’t hesitate to look at some odd jobs that could lead to some quick, cold hard cash returns, too, or selling some of your items on Craigslist that you no longer use.
Question: How Can I Pad My Emergency Fund Faster?
Answer: If there’s no room to earn a little extra at your current job, a side hustle is your best bet to get those personal savings numbers up. Everything from pet sitting, personal assistant work and cashiering, to driving Uber or Lyft, working remotely from home, or managing an Airbnb are just a few of a zillion ways to add some extra income. Get creative, and you might just find out your hidden talent has monetary value.
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