Emergencies happen all the time. You may lose your job, get into a car accident, or experience a natural disaster. In any one of these events, it’s crucial to be financially prepared.
Unfortunately, living beyond day to day financials and thinking about setting aside a savings account may seem out of the question for many people. If this situation sounds familiar to you, you are not alone. According to a survey conducted by the Federal Reserve in 2014, only 53% of people say that they have enough funds to cover a $400 emergency without having to borrow money or sell something.
For a patient visiting one of the 5,564 hospitals registered across the United States, there may be large medical bills attached to their treatment. If you want to be prepared for this situation and have funds set aside, it’s not has difficult as it may seem. Here are three steps to get you there.
Create a Budget
Doesn’t a budget mean lots of restrictions? A lot of people have this reaction when they hear the word “budget.” You simply should make a list of all of your necessary expenses, so you know exactly how much of your income you’re spending every month. This list includes items like utility bills, insurance payments, and groceries. Once those items are in order, you should plan to set a portion of your extra money aside to start building the emergency fund.
Get Rid Of Non-Essentials
If you finished that last section, and you don’t understand where the extra money comes from at the end of the month, then keep reading. Once you list out all of your essential expenses, you will have items left over that can be cut out. This means not going to the coffee shop every day anymore, or canceling your magazine subscription for the time being. Of course, that doesn’t mean you’ll have to live without these things forever! Once you fully understand your expenses, you can budget for a few non-essentials. And you don’t have to do it alone, either. There are many smartphone apps out there that can help you create a budget and determine what is a necessary expense, and what isn’t.
Set Your Goals
When you create your budget, you need to decide exactly how much money you want to be setting aside every month, as well as what the end goal is. So if your end goal is to have $1,000 saved in 10 months, you’ll need to set aside $100 every month to get there. Not sure what your goal should be? To give you an idea, most financial experts say that an emergency fund should be able to cover three to six months’ worth of expenses.
Creating an emergency fund might seem like an impossible thing to accomplish right now, but if you follow the three steps outlined above, you should be well on your way to creating a budget and a savings plan that will last you a lifetime.