Getting Out of Debt_5a More on How to Build an Emergency Fund
Getting out of debt_5a
is more exciting because we are now on Step 3 which is to build wealth and security. From the last page, we figured we have to build an emergency fund and we decided to have a doable amount of $12,000 to build for the rainy day.
Last page too, we came up with Cancelling the cable TV and the cell phone as the easiest ways to start building the emergency fund. This alone could help us build the emergency fund in five years. So let's find some other ways we can build our emergency fund.
Putting the tax refund and the next bonus or salary increase can even make the time to build the emergency fund even shorter. Dining out less often, not going away on a vacation and buying a less expensive car next time you are shopping for one will help a lot.
Here are three plans that will show how much monthly you have to set aside for each plan period you intend to reach your goal for building the emergency fund:
Three Plan Periods To Build An Emergency Fund
||# of Months
||Amount Needed Per Month
Now it is time to put your plan into action. Treat the amount you need every month like a bill that you have to pay for. Pay yourself first instead of paying the credit cards. The whole family has to stop buying things they do not need. Put that money instead into your emergency fund.
Here are additional money you can put in your emergency fund. If you have finished paying off a large purchase or just paid off a loan, put that payment into the rainy day savings account. You don't have to buy expensive coffees at Starbucks. Save that money instead.
Do the same with the cash back or dividend money you get from the credit cards. Try to be innovative and save $5 a day which could net you $1825 a year and a whopping $9125 in five years. Get the family to think of ways to save. You will love the result which is getting out of debt_5a.
Another way you can add to your emergency fund is to reduce your 401(k) contribution to the amount that your company will match. Whatever amount your company does not match, you could use to start saving. Then turning down the thermostat by two degrees could save you thousands in heating cost. They say each degree you turn the thermostat down will save you 5%. Put that into your savings right away.
Here's another idea. Get your company to cut off a percentage of your salary to directly deposit it into your emergency account. You can happily watch it grow and you will be surprised that you won't miss as much as 10% of your pay cheque and to be getting out of debt_5a.
Be aware of the bank fees and the interest they pay you. Some of them don't pay any interest at all. Some other banks will just be happy to have you if your bank does not look after you well. Know how much the banks charge you too. ATM fees could cost you money when you don't plan ahead the cash you need. Some even charge for teller services if you are signed up for ebanking. Put all the money you save from these charges to the emergency fund.
There is talk that some banks are considering to charge fees for debit cards or limit the number of transactions and putting a cap on the transaction. When this happens, you could use a credit card instead and just pay the balance in full every month. Most don't charge annual fees and even provide rewards.
If you opt in for overdraft protection the banks could charge you fees. The best way is to scrutinize your bank statements to make sure you are not being charged a fee. I know they are not supposed to do it but some are still charging those fees. Watching for these fees will help in getting out of debt_5a sooner.
So start right now building your emergency fund. There is no better time than today to start saving for the rainy day. You will soon be on your way to saving the amount you figured out as your goal if you follow all these suggestions. Then it will be easy to build wealth and security after getting out of debt_5a.
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