Do you have an emergency cash fund? I’m not talking about $50.00 in your sock drawer you can use to order pizza when you don’t have anything to cook, or a $20 bill that you’ve tucked away in the glove compartment in case you need gas. I’m talking about a real emergency fund – the type of fund you can draw upon if you need a new compressor for your air conditioning unit, or a new fuel pump for your car. Both of those things recently happened to us, and if it weren’t for our emergency fund, we would have been in trouble.
My husband and I recently went through Dave Ramsey’s Financial Peace University. I’ve shared with you the basic concepts of his Total Money Makeover, but today I’m going to talk about the first step: Save $1000.00 for an emergency fund. This is a true emergency fund and shouldn’t be used for things like clothes for the kids, or groceries. The reasoning is because those aren’t true emergencies – you know those things will be coming up, and should plan ahead for them. While everyone should have an emergency fund, for those on a tight budget, saving up $1000.00 is often difficult.
Here are some ideas to help you save $1000.00:
- Monetize your hobby. Do you love animals? Look into pet sitting for neighbors while they go on vacation or walking their dogs during the day. If you enjoy children, offer to babysit for friends and family. Do you make beaded jewelry? Set up a jewelry show in your home and invite friends and neighbors over. Are you a scrapbooker? Many people want scrapbooks but don’t have time to make their own. Are you good with making graphics? Think through your interests and hobbies and brainstorm ways they can work for you.
- What is something you regularly buy, but could do without? Maybe it is fast food, or Starbucks coffee a couple of times a week, or maybe it is buying paper plates or paper towels. While cutting out one item isn’t going to get your fund to $1000.00, but combined with other ideas you’ll be surprised how quickly you can do it!
- Double think every purchase. Many times we have a difficult time separating our needs from our wants. Get in the habit of asking yourself if you need the item, or just want the item. If it is a want, take the money you would have spent and put it towards your emergency fund.
- Pay your bills on time. Late payment fees really add up, so don’t let them work against you.
- While mortgage rates are low, look into refinancing your home. The money you can save on your mortgage can go towards your fund. And one of the great things about refinancing your mortgage is you usually get a month off from paying your mortgage.
- Cancel any magazine or newspaper subscriptions that you can do without.
- Use up your leftovers. Food is a large part of many family’s budget, and if your leftovers go bad before they get eaten, you are throwing money away. Plan a once-a-week leftover night and keep your refrigerator clean.
- Stop giving your kids an allowance, or cut it back. By explaining to your kids the reasoning behind it, not only will you be making them part of the “team”, but you will be teaching them about money management.
- Save your change. Bank of America has a “Keep the Change” program where for debit purchases, they round up the amount to the nearest dollar and transfer the difference from your checking account to your savings account. And for the first 3 months, they’ll even match your savings! If your bank doesn’t offer this service, try it yourself on the purchases you make. Change can really add up.
- Cancel your household phone. With most people having cell phones, there really is no reason to have cell phones and a house phone. If you don’t like the idea of not having a phone at home, allocate a cell phone to be your house phone. Keep it on the counter and don’t leave the house with it.
- Don’t go crazy with your tax refund. Instead of splurging on something with your money, put it into savings. Emergencies are usually just around the corner.
- Don’t use your credit cards. Credit cards are an easy way to buy what you want, whether you can afford it or not. The amount of money payed in interest over time, not to mention the monthly bill, is not worth the convenience of having something you can’t afford. If you can’t pay cash for an item, don’t buy it.
- Consider making changes to your health insurance. By increasing your deductible you can lower your monthly payment.
- Shop insurance rates. When you take the time to shop, many times you can find lower rates for the same coverage.
- Save at the grocery store by only buying what is on sale, and use coupons combined with store sales to maximize your savings. Plan your weekly meals by the sale flyer, and shop with a list. By using a list you’ll greatly cut back on impulse buys.
- Don’t spend money just because you have it. At the end of the month, if you have extra money, put it into your savings account instead of splurging on dinner and a movie.
- Cancel your cable or satellite television. Most major networks offer the ability to watch their shows online. And between Redbox, Netflix instant watch, Hulu, and a host of other websites that are cropping up, there are many alternatives to paying a hefty cable bill.
- Pack your lunches instead of buying them each day.
- Go through your house and find things you can sell on eBay or Craigslist.
- Cut sodas, expensive snacks, and pre-packaged food out of your diet and bank the savings.
Finding money when an emergency crops up is often difficult to do. But with a little planning and a lot of self control, you can achieve your goal of setting up an emergency fund.