Money Talk: First thing to understand why you need an emergency fund account is that your rent does not accept payment in credit. You wouldn’t want to learn this the hard way after losing a job at an unexpected moment or when the time comes, and your car stops in the middle of the road and you find your credit card at its’ limit due to the previous months’ unpaid debts.
Having an account especially for this purpose would ensure that you still have a comfortable place to stay and your car running. So why a specific amount of one thousand dollars? Basically, $1000 would cover the excess of insurance policies should you have a car insurance, aside from paying for rent during the times you’re out of work and also funding to visit a family member who fell ill – this short guide explains how you can make use of the emergency funds and the five steps to achieve it.
- Set up an unattached account for emergency funds — Money Talk: Open up a basic savings account that isn’t attached to a fixed deposit. This can be done simply using online banking, picking up the phone and calling the bank or just step into a branch. Keep in mind that the money saved in these accounts is within reach in case of emergencies but at the same time, not too easy so consider having the debit card deactivated. Should you need the cash, it’s always possible to have it transferred to your current account automatically or manually. If access to the fund is harder, the better. Don’t make your ever-increasing fund too accessible that you’re using it for a fancy dinner instead.
- Figure out your starting line — Money Talk: Pull your cushion out, look through your work desk, search thoroughly for loose change – then review your bank account – do you have enough change you could use instead of waiting for your salary? If yes, chuck this toward your new emergency fund! Let’s say you found $120 in this fruitful endeavor. Also, consider finding easy to sell items that would help you get a return on past “fun” purchases (prior to switching to consistent saving mode).
- Tune budgeting rhythm to your salary cycle — Money Talk: Have your budget sync with when your pay cheque is supposed to arrive. That way, when you write down the scores for total expenditure, you can divide them accordingly (use an Excel sheet or app to simplify this step). Is there some excess from your budget? Whenever you do, dedicate this amount of $200 for example into your emergency account.
- Use clutter to fill up emergency account, and focus on it — Money Talk: Run through the items you have in your house and de-clutter so that when you look at your old DVD collection, you know what you don’t want or need in the house. Sort the items (that are in good condition, preferably) that you want to throw out, donate and finally sell. Categorizing them this way will instantly help you with your step toward minimalism (and saving). Additionally, selling your old stuff is an awesome way to find spare change in the de-cluttering process. You can opt to list and sell the items on websites like eBay or Gumtree Australia. A garage sale is another great idea if you’re looking to sell furniture and kitchen appliances instead, with a positive profit approximate of $500. You can check out our article on running a lucrative garage sale and maximizing profits!
- Cancel expenses and throw it into your savings — Money Talk: Think about the last time you went to the gym or used pay per view television – cancel these subscriptions! Until you are motivated again, you might want to rethink spending $80 each month on a gym membership or a $100 subscription to pay television. That’s a total of $180 that could have gone toward your emergency fund. With all the above added up, it comes down to a total of $1000 in your account! The numbers are thrilling to see, but keep in mind that this amount is set in your account and is only to be used in case of a real emergency. Boost this account by adding to it bit by bit, and just remember to top it up whenever you do end up using it (because of emergencies!).
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