After an unexpected surgery cropped up a few years ago, I knew I had to build an emergency fund for myself.
But saving three to six months of expenses was daunting, so I started with the goal of saving a “baby” emergency fund of $3,000.
I followed a five-step strategy that included automating a certain amount to my savings account, looking for opportunities to make extra cash, cutting back on expenses, and setting strict rules for how that money could be used.
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It’s no secret that most Americans lack sufficient savings. Some of us may not think about preparing for a rainy day until a rainy day comes along.
For me, having debt played a big role in not being able to save as much as I’d like. In 2015, I was motivated to get rid of a high-interest car loan and some credit card balances, but I wasn’t putting much in savings. Then, an unexpected surgery showed me the importance of having emergency savings set aside.
Still, going from $0 to $10,000 or $20,000 saved seemed so daunting. Experts recommend setting aside three to six months of expenses in an emergency fund. This means if your monthly minimum expenses are $4,000, you’d need to save around $12,000 to cover three months. Saving large lump-sum amounts of money can seem motivating, but it can also be intimidating if you’re just starting out.
Why I started a ‘baby’ emergency fund
I chose to start with a “baby” emergency fund because, let’s face it — we all have to start somewhere. Saving something is better than nothing, and I like to break bigger goals down into more realistic milestones. Before you can save six months of expenses, you have to be able to save one month of expenses. So that’s where I set my initial benchmark.
Here are some key things I did to save $3,000 in just a few months.
Working savings into my budget
There are so many different places your money can go. Before you know it, you may reach the end of another month and realize you don’t have enough leftover to save. To avoid this, I made a commitment to myself to reach …read more
Source:: Business Insider