While we tend to focus our tips and tools on retirement and long-term financial planning, the truth is that every day life can sometimes interrupt your long-term financial plans.
If you don’t have an emergency savings set up or a plan in place to fund one, you’re not alone. About 57 million Americans have no emergency savings. While this is an improvement from last year’s estimate of 66 million Americans without emergency savings, the truth is that most of us would likely see our financial path derailed if a sudden, emergency expense popped up.
The first step is to acknowledge that emergency saving is part of your overall financial plan. While it’s vital to think about retirement and insurance planning, don’t forget that short-term financial needs are real and can come up at any time.
An ideal is to have three to six months’ savings available to you, though it may not be possible to accumulate that much savings immediately. The trick is to start small, and always make sure you have at least one months’ savings on hand at any given time.
Here are a few ways you can start building your emergency savings:
1) Figure out how much money you need. This is the first step for any financial goal, but it’s especially important for emergency savings. Take a look at your expenses and figure out how much you would need to cover them for one, three, and six months. You can start with a smaller goal, and work your way up to having a three to six month emergency savings fund.
2) Set up a separate bank account for your emergency fund and deposit a portion of your paycheck directly into that fund. Companies that allow for direct deposit of your paycheck may also allow you to deposit into multiple accounts. Look at your budget and determine what amount you can put into an account that’s specifically dedicated to emergency savings. If you don’t have direct deposit for your paycheck, then schedule an appointment each week for you to transfer money out of your primary account into your dedicated emergency savings account
3) Use technology to help you. There are many digital tools that are specifically designed to help you reach short-term savings goals. Check out this rundown of the best options available to you for building your savings with the help of your phone.
There’s no reason to sacrifice retirement peace of mind while preparing for the unexpected.
Need help taking the first step? CONTACT THE ROBIN S. WEINGAST & ASSOCIATES TEAM and we’ll discuss your entire financial future — emergency savings plan and beyond!