No one expects it to happen to them, but emergency situations can surprise the most careful of people at the most inconvenient of times. Sadly, many people simply aren’t financially prepared for the costs that many emergencies bring. In fact, 55% of Australians are unable to cover an unexpected $1,000 emergency.
Whether it’s an unexpected car repair or losing your job, you need to be prepared. Without an emergency fund, you could find yourself having to take out a loan or credit card in order to pay for any unexpected costs. Credit shouldn’t be your only safety net.
You deserve a greater peace of mind.
We’ve come up with some important tips to help you grow a pot of emergency cash even if you think it’s too late. If you’re having trouble with your debt and don’t think now’s the right time to start yours, Debt Busters can help. Speak with us today or take a look at our debt solutions to see how we can help you overcome your existing debt and start your emergency fund as soon as possible.
1. Make a Budget You Can Follow
Anyone can start an emergency fund. It’s not only for those who are secure financially. In fact, an emergency fund is especially important for those struggling with debt and savings. You should have several months of expenses saved away just in case something unexpected happens. This is separate from your typical savings, and it’s only for emergency situations.
The first priority you need to focus on is creating a budget. To start, work out your monthly income and deduct any outgoings. Financial obligations like car payments, credit cards, bills, and so on should be included in this calculation.
What’s left should give you enough money for food and luxury items. As a rule, you need to try to save at least 10% of your monthly salary for growing your emergency fund. Even if you can’t put that much away, make a plan to build up to that percentage. Just remember it’s not too late if you start now. If you start today, by next month you’ll already have some emergency cash to help you stay protected in bad situations.
2. Look for Simple Ways to Cut Costs
Cutting costs from your daily living expenses and luxury items may seem like you’re about to enter the world of boring. However, cutting costs is more about being creative than it is being unnecessarily strict on yourself.
Where are you overspending? Here are the most common areas:
- Coffee or treats out
- Fast food or take away
- Bar tabs or nights out
- Expensive travel
- Transportation expenses (fuel, tolls, etc.)
Bad habits are normally the source of overspending. By tracking how much you overspend, you can discover new ways to cut costs going forward. Monitor what you spend your money on and work out what’s honestly a waste to you. You’ll be surprised how all the little things you don’t really care about too much start to add up to hundreds of dollars over time. To grow your emergency fund, you need to save in small ways.
3. Set Careful Milestones
If you don’t know where you’re going with your emergency fund, it’ll be hard to get there. You need clear milestones. The key here is to set realistic milestones that you will be able to hit frequently throughout the month. There’s nothing worse than working towards a big number without feeling like you’re getting closer.
Think about what’s realistic for you each week. Maybe you should start by trying to save $10 or $20 on top of saving 10% of your salary each month. If that’s too much, simply look at your budget and work out what’s right for you. It’s not too late to start to save emergency money and protect yourself. Even if you skip your weekly coffee purchase to put $5 towards your emergency fund, every little bit matters.
Creating an emergency fund shouldn’t be seen as a punishment, no matter how late you’ve left it. Why not celebrate hitting your monthly targets by grabbing a beer, getting take away, or treating yourself to something you’ve wanted. You don’t even have to spend to treat yourself! A night with your favourite movie, baking your favourite dish, or just being with friends are all rewards. You’ll feel better for doing it and reinforce your motivation to press on with saving.
4. Deal with Your Debts
You can think of debts like roadblocks preventing you from growing your emergency fund. To grow an emergency fund, you need enough money to put towards savings. This is hard to do if you’re struggling to get out from under debt payments.
Debts are the number one reason why people struggle to start an emergency fund. With money coming out every month it can seem totally overwhelming to consider saving anything at all.
In this situation, take a look at consolidating multiple debts into one lower monthly repayment. You also could shop around for a cheaper credit card if you only have one. Getting your debt under control is vital in increasing your spending and saving power.
5. Find Extra Income
Finally, sometimes you need a bit of an extra push to make strides in your emergency fund. A great way to do this is by finding some extra income. We don’t mean you need to go out and get a second job, though that can be a good idea for many. Instead, look for small ways to monetise your time.
Whether you have a side hustle or you join the gig economy, here are some ideas for finding extra income for your emergency fund:
- Drive for a rideshare service in your free time
- Freelance online a few hours a week
- Sell a craft or baked goods at a local fair or event
- Offer childcare services for neighbours
- Care for pets or watch homes while people are on vacation
- Start a blog or monetise a YouTube channel
While small, these are all ways to make a little extra cash each month. Bonus points if it’s a job or side hustle you love! All you need is 5 – 10 hours of time a week to really make a difference. The gig economy is big business! Today, over 7% of Australians have done some kind of gig work. Why not try it for yourself? You might discover a new career.
Grow Your Emergency Fund For Your Financial Future
Are you ready for any emergency? If you’re not careful, you could find yourself relying on credit or payday loans to get out of a tricky financial situation. Unfortunately, there’s no way to predict the future, you can only prepare for it. You never know what’s around the corner. While you might wish for the best, you always need to prepare realistically for the worst.
Whatever you think about your situation, it’s not too late to start an emergency fund and save for any upcoming rainy days. However, if you’re under pressure from debts and credit cards, Debt Busters can help. Contact our friendly team today on 1300 368 322 to find out how you can take back control of your finances and be in a better position to start saving emergency cash.