Life rarely goes according to plan. Having money set aside in an emergency fund can help you manage a setback, such as a job loss or an unexpected medical bill, rather than have it turn into a full-blown financial crisis. Your emergency fund should have enough money to cover three to six months worth of living expenses.
Know Where Your Money Is Going
Many people understand the importance of having an emergency fund but find it hard to save. If you don’t know where your money goes, it will be hard to find areas where you can cut back. Taking a detailed look at how you currently spend money may help you identify several ways to boost your savings. In many cases, that won’t mean that you’ll have to give anything up.
Write down every single thing you spend money on for a month. Your list should include bills for essentials, such as your mortgage, as well as discretionary spending on things like eating out and entertainment.
Find Ways to Save on Bills
Review your homeowners, auto and life insurance policies. If you contact several companies, you may discover that you can get the exact same coverage through a different insurer and pay lower premiums. If you currently have policies through multiple companies, you may get a significant discount by bundling your policies and buying them all from one insurer.
Take some time to review your internet, cable and cell phone bills, and compare your current rates to the ones that other companies charge. A competitor may offer a better deal.
If you’ve been with your current providers for years and you’ve paid your bills on time, they may be willing to lower your rates to keep you as a customer, especially if you tell them you’re thinking about switching to a competitor. Call the companies you currently do business with and ask if they’d be willing to reduce your rates.
If you have high-interest credit card debt, look into balance transfer options. You may be able to significantly reduce your interest rate or even knock it all the way down to 0%. You’ll have to pay a balance transfer fee, but the amount you save in interest may be much greater than the cost of the fee.
Cut Back on Unnecessary Purchases
Many people have no idea how much money they spend on coffee, meals from restaurants and other things they grab on the go. That’s why writing down every single purchase you make for a month is important.
Seeing how much you spend on things that you can do without can be an eye-opening experience. You don’t have to eliminate those purchases entirely, but you may find that cutting back will save you a substantial amount of money and help you quickly build up your emergency fund.
