Having an emergency fund is crucial to your financial well-being. Life happens sometimes and when it does, it is good to have something to fall back on to take you out of that situation or at least cushion the effect. It could be the loss of a job, a medical emergency or unplanned home or school expenses, having an emergency fund provides you security when situations like these arise. Here are ways you can start building your emergency fund.
Set a Goal
Have an amount in mind that you would like to save and set a time frame to achieve this. This will help you budget how much you need to set aside from your income for your emergency fund. Putting a time frame to it will help you measure your success. If your goal is to save 20,000 in two months, your income and expenses will be tied around achieving that goal.
Create a Budget
Have a specific portion of your income that you set aside to put into your emergency savings. This should be top priority when building your emergency fund. Having a budget will ensure that you do not make unnecessary expenses that will make you default on your savings.
Start Small
Experts advise that you should save to cover three to six months of expenses but if you do not have up to that, you can start with a month’s expenses or two months. You know what they say about little drops of water making a mighty ocean. The important thing is that you start saving no matter how little.
Automate Your Savings
There is always that urge to splurge when that deposit hits your account but if you don’t see it how do you spend it? Set an auto-save in your account that automatically deposits a certain amount into your emergency savings account. If you are not financially disciplined, this is a perfect way to build your emergency fund. It saves you from having second thoughts about saving that money. Download the UBA Mobile App and set up your autosave in an instant.
Save from Unexpected Income
If you receive unexpected income such as cash gifts, work bonuses, tax rebates or inheritance, please shut out that voice that is telling you to go spend it all, after all, it came free and unexpected. Take that money and put it into your emergency savings but if you must, then spend a bit of it.
Cut Unnecessary Expenses/Minimise Debt
Spend on what you need and not what you want. That way, you will have money to put away in your emergency account. Pushing self-gratification to the future may be inconvenient but it will pay in the long run. Always having a debt to pay will make it difficult to build your emergency fund because debts need to be serviced and repayment may leave you with nothing to save. Sometimes, debts are unavoidable so weigh your options and only incur necessary debts.
Stay committed to your savings plan no matter what. Be patient and persistent and over time, your savings will provide you with the security required when an emergency happens.
Talk to your UBA financial advisor to get started.
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