Emergency Fund- Start Small, Think Big!
Many people wonder how they can build an emergency fund when they’re trying to pay off their debts. It isn’t as hard as you might think. The strategy is to start small, change a few habits, and change your mindset.
If you’re starting from scratch with your emergency fund, begin by saving $1000 (or $500 if it would take too long to get to $1000) while paying the minimum on your credit cards. When you have that emergency fund started, turn your focus to your credit card debt and pay more than the monthly minimum. (See our post on the “Debt Snowball”). Once the credit card debt is paid off, go back to building your emergency fund.
Alternating Payments & Deposits
If your credit card debt is very high and is creating extra stress, you might try alternating the extra payment every other month. The first month, add to your emergency fund and pay the minimum on your credit cards. The next month, pay more on your credit cards and skip the deposit to your emergency fund, etc.
Ideally, you want three to six months of living expenses in your emergency fund long term. Pay off those credit card debts, and get started on that ideal emergency fund.
Here are five ways to boost your emergency fund and change savings habits for life:
- Pay Yourself First! Treat savings as a bill. Figure out what you can afford to save each month and stash away $75, $50, $25, or even $10 a month. No matter the amount, it adds up and can become habit-forming. As your financial situation improves, increase the amount.
- Live one raise behind. When you get a raise, don’t begin spending more. Instead, apply the extra amount to your emergency fund.
Use Technology to Your Benefit
- Automate it. Set up an automatic transfer to your emergency funds account. When the credit union receives your direct-deposited pay check, you can have a portion of it put directly into your savings or emergency account. Out of sight, out of mind, but you know it’s there if you really need it.
- Give savings a garage-sale boost. Go from room to room in your home and purge stuff you no longer want and need. Then schedule a garage sale. It’s Spring here in Central Oregon, or “garage-sale” season! Both your house and your savings will look better.
- Think of it as a life jacket. If you can’t find that initial spark to get started, ask yourself how you’d pay your bills if you lost your job tomorrow. Having an emergency fund will help you keep “your head above water.”
Remember: At Mid Oregon Credit Union, we are ready to help with all your savings needs. Call us at (541) 382-1795, email us, or visit one of our 7 Central Oregon branches to set up short-term and long-term savings vehicles that fit your needs. Or visit www.midoregon.com for more information.