11/05/2020: Maximize Your Emergency Fund
It’s hard to find a feeling more stressful than realizing you don’t have enough money to cover all of your upcoming bills. The obvious goal is to never let your budget reach that point, but the COVID-19 pandemic has laid a crushing blow to many people’s finances.
Statistics from the Federal Reserve show the average household in the United States has about $8,800 in savings. From a time perspective, 45% of Americans only have enough money saved to last three months or less without income.
Emergency savings help protect you and your family financially in case of unexpected job loss, medical expenses, or another sudden change in life like a worldwide pandemic. If you have an emergency fund for these types of situations, here are five strategies for making that money last longer.
Create a spreadsheet
By visually compiling all of your bills, you can see your expenses in one place. Start with what’s necessary, such as your rent or mortgage, utilities, food, and transportation. Set aside money each month for these expenses. This is your baseline for survival.
Cut unnecessary expenses
After you identify the money you need each month, you can work on eliminating the bills you don’t need.
According to a survey by the Bureau of Labor Statistics, Americans spent an average of $1,188 in a year on their cell phone. Perhaps you’re paying for an unlimited data plan when you don’t need to use your phone as often outside of WiFi range. Cable bills can exceed $100 per month, so reducing your paid television plan to one or two streaming services could significantly affect your bottom line.
Do you order takeout or visit your local coffee shop on a daily basis? Curbing these habits will make small dents in your weekly budget that will add up to big gains at the end of the month.
Use a credit card
Do this judiciously because you don’t want to accrue a large amount of debt that you can’t pay back quickly. However, if you’re in a situation where you won’t have income for only a short time, you can save your actual cash for other expenses and charge some of your other expenses. Try to store your credit card outside of your wallet or in a locked container to help avoid using the card on unnecessary purchases.
Buy generic brands and shop sales
When you go to the grocery store, you’re in control of how much you spend. You can search the internet or the newspaper for coupons that will help you save money. Keep your eye out for buy-one-get-one deals or sales on bulk items.
Don’t be afraid to trust generic store brands, either. These products can shave dollars off of your total, and the main difference between generic and name brands is often packaging not quality.
Find free entertainment
Have you heard the saying, “Be thankful for what you have?” It definitely applies here because you don’t want to waste your emergency fund on golf trips and movie rentals. Watch the movies you already own, dive into your favorite book, dig your baseball glove out of storage and throw the ball around in the park, or have a family night with some board games. The point is that these entertainment options don’t cost a penny as you wait for a new source of income.