If the pandemic has taught us anything, it is the importance of being prepared for financial turmoil. Millions of people lost their jobs in the last 19 months or had their income affected. Now more than ever, it’s clear that creating an emergency fund should be a priority.
But 37% of Americans aren’t sure they’ve saved enough cash for emergencies, according to a recent survey by the National Endowment for Financial Education. Ideally, a solid emergency fund has enough money to cover three to six months of essential bills. You can use this calculator to find out how much money you should aim for.
If you don’t have a fully loaded emergency fund, here are some steps you can take to quickly build one.
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1. Sell items you no longer need
Downloading items you don’t need to get cash is a great way to build your savings account balance. Comb every room in your house and take an inventory. Then round up those kitchen gadgets, electronics, and toys your kids never took out of the box and do your best to find buyers.
You can advertise on social media, post your items for sale to local neighborhood groups, or use sites like eBay (although you’ll pay a fee to go the latter route). You can even hold an old-fashioned garage sale.
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2. Get an extra hustle
Most of your paycheck may go toward recurring bills. But if you choose a side job, you can use the money you earn to increase your emergency fund.
If you’re not sure how to pick the right side hustle, think about your schedule. Are you fairly open outside of your normal business hours? Or do you need a gig you can do at your own pace, like data entry from home? Spend a little time planning the perfect concert so that your side event ends up being a success.
3. Cut some substantial expenses temporarily
Many of us pay for things that aren’t technically necessities, but make life enjoyable. These include things like cable, streaming services, restaurant meals, and getaways or vacations. Cutting these treats is something you may not want to do forever, and you shouldn’t have to. But if you have little emergency savings and want to build it up quickly, you may need to temporarily draw down.
Calculate how much money is missing from your emergency savings. From there, see if trimming your expenses will make a reasonable dent.
Let’s say you currently spend $300 a month on the above items and your emergency fund is $1,000 short. If you can find a way to cut that $300 from your monthly budget, you could reach your savings goal in just over three months. And once you reach that goal, you can go back to spending as usual.
4. Try to become an owner
If your house is big enough or set up accordingly, it may be feasible to rent out a part of it temporarily. You can use the money your tenant pays you to increase your emergency fund.
That said, you’ll need to make sure your local zoning laws allow you to convert part of your home to a rental. Contact your city or town’s zoning or building department for more information.
There is also a downside to taking on a tenant, namely having to share your space and having to play the role of landlord. But collecting rent is a good way to build up his savings quickly, so it may be worth the sacrifice.
Get the peace of mind you need
Having a solid emergency fund could help you sleep better at night and get through the day with less stress. If your savings need work, use these tips to give them that essential boost.
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