If this coronavirus pandemic has taught us anything, beyond social distancing, washing our hands and wearing a facemask, its that our income stream can be suddenly and unexpectedly interrupted. If you are fortunate enough to have avoided Covid 19 and you’re among the 80% of the working population who still has a job, now would be an excellent time to build or supplement your emergency fund. The emergency fund may not cover every emergency situation, but it can certainly create a bit of a cushion and provide peace of mind.
Most experts agree that an emergency fund should be equal to three to six months of income. Of course, that seems like a daunting task when you have fixed expenses like a mortgage or rent, car payment, and utilities. The trick is to find ways to curtail your discretionary spending. In other words, spending for things that you don’t absolutely have to have right now.
Here are 3 easy ways to build your emergency fund:
1. Cook at home and limit dining out.
If you are like me, you have been cooking and eating at home a lot more in recent months. Although my grocery budget has increased a bit, my restaurant expenses have dropped dramatically. Because I am eating out less, I have saved about $200 a month. As a matter of fact, I plan to continue this new habit of dining at home going forward.
2. Identify wants versus needs and only spend for necessary items.
Looking around my home I see quite a few “wants” purchases. Considering the pandemic, I wish I had the cash instead of the thing.
So before making any purchase, be it need or want, comparison shop for the best price and look for discount coupons when shopping online. Also, try giving yourself a cooling off period before making a purchase. After a week or two, if you are still interested in the item, go ahead and buy. Just remember, that small purchases can really add up. If you can avoid spending $25 a week on unnecessary purchases, you will have $100 a month to add to your emergency fund.
3. Eliminate Self-storage expense
Let’s face it. Most of us have just too much stuff. If you are storing some of your possessions in a storage unit, it’s time to clean out those closets, basements and garages. This will make room at home for those must keep items that you currently are paying to store. According to move.org the average cost of renting a 10×10 climate controlled unit is $138 per month.
Using the figures in the above examples, your emergency fund could be increased by $438 per month. That’s $5,256 after one year!
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