Whether you already have been saving up towards a large purchase (for example, a down payment on a home) or you don’t have any type of savings, it’s important to create an emergency fund. The money from an emergency fund should never be touched unless absolutely necessary; it is meant to provide financial protection in the event of an unexpected situation, such as a job loss, accident, or medical illness. Financial experts recommend that an emergency fund should contain anywhere from three to six months’ worth of expenses. This includes your monthly basics, such as rent or mortgage, credit card and car payments, utility bills, food, and other necessities. If you have yet to start an emergency fund, there is no better time to start than now. The following are five steps for starting an emergency fund.
Pick a non-negotiable fixed amount
Go through your entire budget carefully and decide on an amount that you can realistically contribute to your emergency fund each month. You may want to pick a smaller amount that you deduct from each paycheck, or you may want to make it a one-time monthly payment that occurs each month on the same date, such as the 1st or the 15th. Do not pick an amount that is too high because it can be easy to become frustrated and give up altogether on building your emergency fund. Pick an amount that you know you can afford to save each month, and once you decide on this amount, pretend that it is a mandatory bill payment that must be made.
Make your deposits automatic
After you’ve picked a specific amount to put towards your emergency fund each month (or with each paycheck), make these payments automatic. If you never even see that extra money come in because it goes straight to another account, you’re likely to forget about it and less likely to spend it.
Make it somewhat difficult and inconvenient to access
As you start to build your emergency fund, it may be tempting to dip into it now and then for reasons that don’t exactly qualify as emergencies. Look into savings accounts that don’t make withdrawals easy, which will make it more difficult to spend unnecessarily from your emergency fund.
Realize that anything is better than nothing
It can be discouraging to hear that an emergency fund should contain a few months’ worth of expenses if you’re only able to put aside a very small amount each month. When some people do the math, they decide that the time it will take for them to save up that kind of money makes the entire process impossible or not worth it. But even just having a month’s worth of expenses saved up in an emergency fund can prove to be extremely helpful. If you are able to sacrifice some non-necessities to get to your emergency fund goals much sooner, do so—but don’t be discouraged to save simply because you can’t save much.
Contact Peachtree Financial Solutions
If you are receiving structured settlement payments, you can turn some or all of those future payments into a lump sum of cash now. Although these periodic payments may help with your expenses and bills, without having enough accessible cash saved up, they may not help much should a true emergency ever arise. A lot of people contact us and sell their structured settlement payments to receive cash to avoid foreclosure, eviction, eliminate credit card debt, and more. But why wait for a job loss or other financial emergency to happen? Get a jumpstart on your emergency fund by contacting Peachtree Financial Solutions. Because it can take up to 90 days for your transaction to finalize, it’s important to act now, not once something happens. By only selling a portion of your structured settlement payments, you can take comfort in knowing that you have access to a lump sum of cash, should you ever need it in the event of an emergency.
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.