Before you draft out a budget, begin by keeping a journal of your spending habits. Even if you spend just .50 on a piece of candy, be sure to put that in your journal. When it comes time to draw out a budget, look at your journal to see what you were spending and where. This will help you identify which expenses are mandatory, which ones can be reduced (i.e. energy usage), and which ones you can cut out entirely (such as that piece of candy). The money you're saving on your budget can go right into your emergency fund.
You should have a special account, designated just for your emergency fund. This means that you'll have to resist the urge to use it for a vacation or a new T.V. Experts recommend starting out with at least $500, since this is usually enough to cover most emergency expenses. Over time, you can build that up, so you'll be prepared for more costly expenses, such as medical bills.
A trick for stashing some extra money away in your rainy day emergency fund is to keep your checking account even. Transfer change and that odd dollar into your savings account on a weekly basis. Over time, these small deposits will add up.
If you're a coffee drinker, asking you to cut this habit out entirely may be too great a sacrifice, although it would greatly benefit your health and your finances. At the very least, stop going to cafes, where you're paying $5 to $10 for premium or custom blends. Invest in a thermos and bring your own coffee to work, or drink what the company provides free of charge. The money you would spend on coffee for the day should go directly into your savings account.
While it may not be glamorous, bring your own lunch to work. The money you spend in the cafeteria or at the local fast food joint should be going to your savings account. It's cheaper to buy in bulk and pack a healthy lunch than it is to go for the meal deals at the restaurant everyday. You'll probably enjoy it more, as well.
You may have to pay off some balances first, but, once you do, cancel those accounts and tear up the cards. You don't need them. Very likely, you were talked into getting them in the first place to cover unexpected emergencies. That's why you're building this fund. Isn't it better to save the money and have it than use credit to cover an emergency and still owe? In addition to the expense, you'll also be paying interest, which will continue to build over time, until you pay off the balance. It's a cycle that's costing you more than it's giving you.
There are two main ways to maximize your savings: reduce your debt and make more money. Once you've cut your debt and changed your spending patterns, it may be time to pick up a side job. It doesn't have to be a full-time job. A part-time gig will give you enough to put away. If you don't want to be stuck indoors for another working shift, try driving for Uber or Lyft or doing odd jobs in your neighborhood. Anything extra you make should go into your emergency rainy day fund.
If you want to play around with investing, do it with other funds. While there is the potential to make more money, there's also the risk of loss. You may end up losing all of your savings and will have to start over again. Instead, open an interest-bearing savings account and leave your money there, where it can grow steadily without the risk.
Do you really need cable or satellite television service? If you have internet service, the answer is probably no. There are many resources online for watching your shows legally. On that subject, you can cancel your newspaper subscription as well. Instead, visit Yahoo!, MSN, or Google for your daily dose of news. Additionally, many magazines can be read for free online. The more paid services you can cancel, the more money you'll have to add to your savings account.
It may take some sacrifices, or it may just take a reshuffling of your budget, but you should commit to putting a specified amount in your savings account from each pay period. This will help you build up a nest egg that much faster and ensure you're covered for emergencies. You can never predict when something will happen, but you can be prepared for it. By starting a savings account as early as possible, you can build up a large safety net for your future and, if one thing is certain, you will need it.
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