No Safety Net? Professionals Share 3 Ways To Boost Emergency Savings
Prioritizing savings is key to financial well-being. Building an emergency fund, which generally represents multiple months of living expenses, is one way to do so.
These safety nets are not only key to financial wellness, but might help you avoid debt or dipping into retirement savings. Whether it’s a medical emergency, the loss of a job or a busted car, these can often put a toll on finances and derail savings.
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However, experts say with a plan and living below your means, you can grow your emergency fund. Here are three tips that were recommended to help you save more of your money.
1. Loud Budgeting
Loud budgeting has been a prominent financial catchphrases in recent years, but far from being a fad, experts said it’s worth trying to grow your savings and live within your budget.
In essence, loud budgeting helps prioritize living within or below your means by being honest and forthcoming about your financial needs and priorities.
“It means spending money on what’s important and cutting costs on the rest,” said personal finance expert and Raisin president, Ben McLaughlin. “We are in the midst of a cost-of-living crisis and wages are stagnant — many of us are looking for ways to save money and grow our savings.”
If you’re vocal about needing to cut excess spending and save for the future, you can reorient your behavior toward quality time and experiences, rather than spending money as the default.
“That’s not to say you can never enjoy a nice restaurant or fancy coffee again,” he added, “But if you need to save money, maybe these experiences can become special occasions instead of regular expenses.”
2. Start Small and Keep Building
Having multiple months’ worth of living expenses covered in your emergency fund can sound daunting, so starting small might seem more feasible. What matters is to do so regularly.
Uziel Gomez, founder and financial planner at Primeros Financial, suggested establishing smaller, manageable goals to maintain your momentum and work steadily toward this larger goal.
Meanwhile, McLaughlin emphasized contributing regularly toward an emergency fund.
“Even if it’s only $10 a week, developing your saving ‘muscle’ will set you up for future success,” he said, adding that you can maximize your savings by keeping your emergency fund in a high-yield savings account where it will earn interest and work harder for you.
3. Ditch the Plastic as Much as You Can
One of the best things you can do to ensure you are living below your means is to avoid abusing your credit card, according to Erika Kullberg, an attorney, personal finance expert and founder of Erika.com.
Of course, a credit card is a valuable financial tool that can help you build your credit and earn rewards such as cashback and airline miles. However, Kullberg said the only way to make a credit card work in your favor is to pay off your balance in full each month.
“You should never charge a purchase you can’t afford to pay off at the end of the month unless it’s an absolute emergency. Ideally, you will have an emergency fund ready and waiting so you can avoid doing that,” she said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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