Financial experts, from Suze Orman to Maria Bartiromo often suggest putting away a set amount of cash each month to cover emergencies. The advice looks great on paper, but when you’re pinching pennies saving money can be next to impossible. After all, how can you save what you don’t have?
According to experts, in cases where your budget is stretched to the limit, you should still put aside a few dollars per month. Even if you are only able to sock away $250 to $500 in a year’s time that money can help offset unexpected expenses, such as vehicle repairs or medical bills.
In order to add more to your emergency fund you will need to learn how to budget carefully. By figuring out how much you need each month to cover your necessary living expenses, you can then target areas where you can reduce spending, or decide if you need to find another job to increase your income.
One way to avoid spending money you should be saving is to set up an automatic deduction. If you are already getting your employers to directly deposit your paycheck in the bank, ask if you can designate a portion of your pay to go to a separate savings account. If that is not an option, check with your bank and see if you can have a certain amount of the direct deposit automatically transferred from your checking account to your savings account.
One of the most popular ways to save for emergencies is the envelope method. The system involves filling envelopes with a certain amount of cash to pay for non-billed expenses. Depending on how much you make in a pay period and how many bills you have to pay, consider setting aside $10 to $100 every two weeks. If you are not struggling financially, experts suggest you put 10 percent of your household’s net income into an emergency fund each month.