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Friday, March 20, 2020

How to build an emergency fund

Right now times are extremely stressful for people around the world during COVID-19. This is a test of faith and strength for all of us. Right now millions of people don't know what the future holds economically for our families. My husband and I are in constant worry of our jobs and any potential medical expenses. I am no financial advisor I am just offering advice that works for my family and I want to pass it along to you guys. One way to avoid getting caught off guard is having an emergency fund or some call a reserve fund. According to bankrate nearly 3 in 10 Americans don't have an emergency savings. That is 28 percent!
The best part of having an emergency fund is to ease your mind knowing that you have this money set aside. 
Here are some steps on how to build an emergency fund:

1. Look closely on where you spend your money

The first step is understanding your spending habits. Once you understand how you behave you can then begin new good habits towards your goals.  Find a system that works for you that allows you to track your spending. Ways to track your money are:
- write your expenses in a notebook
- take time to look at your bank and credit card statements
- use a tracker app (ex | Clarity Money 
- create a budget google sheet or excel sheet 

2. Don't ignore other debt responsibilities

Make sure that you are still paying off your credit card or student loan debt. You don't have to fall behind and have it hurt your credit score. Focus on still making your payments on time and don't let the emergency fund get in the way of this. Remember slow and steady wins the race! 

3.  Consider financial habits to increase your goals

Once you figure out how much you want to have in your emergency fund now you can stratgize others ways to to meet your goal. You can either: increase your income or spend less in some areas. 

Increase your Income
Write down some ways that you can possibly increase your income. Could you turn a hobby into passive income. Add a part time job to your schedule. Become a car service driver for Uber or Lyfte. Sign up for UpWork and become a Virtual assistant. 

Spend Less
This is hard but its great to establish discipline. You need to separate needs vs wants. But also don't take it too far where you find yourself unhappy. Balance is key here. 
Ways to spend less:
compare retail prices when shopping 
use coupons or wait for sales
make dinner as much as possible at home
look for free events in your area
plan your meals and grocery list before going out to shop

4. Look into a high yield savings account 

ONline savings banks offer higher interest rates than regular brick and mortar institutions. At one point rates were as high as 3%. However with the coronavirus crisis I am not sure if rates have dropped. I suggest doing some research and seeing if this option is a good fit for you. 

5. Plan an amount that covers 3 months of emergency expenses

This is a good starting point number. Include in this number your rent/mortgage, utility bills, car loan payments, credit card monthly payments, cell phone bill and food. 

6. Once you reach your goal don't stop!

I did this one time and I am still mad at myself for stopping! Whatever your goal once you hit it keep saving! The bigger the cushion the happier you will be in the future when you are ready to buy that house or need money for any big future life changes. Its better to use this money during emergencies then using a credit card! That is a big NO NO and is counter productive! 

I hope these tips were helpful to you guys! I know these times that we are living in are hard and I am there with you but I am working hard on offering posts that will provide resources and encouragement to my tribe! 

God bless you guys! 


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