Better late than never. You’ve probably heard of that one before, but it can be a hard one to put into practice — especially when it comes to your finances.
It can feel like there’s an invisible clock hanging ominously over your head whenever you look at your bank account. And once it gets down to zero, another common saying pops into mind: that ship has sailed.
Although you feel as though you’ve missed a golden opportunity by waiting too long, the ship hasn’t sailed and the train hasn’t left the station. Today we’re going to show you how you can start saving at any time.
Savings are a cornerstone of good money management
When it comes to your finances, your savings account is one of the most important things you can have. Sure, you use your checking account to deposit paychecks and pay bills, but it’s your savings that will help you when things go wrong.
Aptly called an emergency fund for that reason, your savings account acts as a safety net when bills, repairs, and other misfortunes come your way.
If you don’t have a big emergency fund, then you’ve probably used credit cards and personal loans to help cover these emergencies in the past. Depending on how often you apply for these loans, and whether you pay them back on time, they may end up hurting your credit score.
The benefits of building an emergency fund are two-fold
Not only will you be able to cover unexpected expenses, but you’ll also be able to rebuild your credit rating by relying on credit cards and personal loans less often.
The trick to building an emergency fund that’s capable of protecting you from financial shock is all about sacrifice. It may not be the word you want to hear, but it’s essential to saving.
Look to your budget for answers
There’s no way to find savings without first spending some time with your budget.
Consider the items or services that are essential to your health and safety. Things like medication, groceries, and housing fit the bill. These are your needs. While you can find savings here by moving or getting a new job with a generous drug plan, these lifestyles changes are hard to make.
The wants, on the other hand, offer an easier route to savings. They’re usually inconsequential things that make your life a little more fun, like vending machine snacks, streaming subscriptions, and weekend trips.
Start slowly by reducing how much you spend on these items to get a feel for living a less extravagant lifestyle. Once you get used to living with less, try eliminating them altogether.
Separate savings from other accounts
However you start saving, any money you collect by skipping these expenses should go into a dedicated savings account.
By keeping your emergency fund separate from your checking, you’ll be less likely to dip into these funds for things that aren’t emergencies.
How long will it take to create a robust emergency fund?
There’s no easy answer to this question, unfortunately. It depends on:
- How many “wants” you have to eliminate from your budget
- How well you’re able to reduce what you spend on the essentials
- Your financial luck
Yes, part of your success relies on fate, because it’s not a matter of if you’ll face an emergency but when.
If you’re unlucky, you’ll have to empty out your fund just as you started to accumulate some cash. Depending on the expense, your savings may not even be enough.
Luckily, there are lending alternatives that can help you bridge the gap in your finances, even if you’ve done some damage to your credit score in the past. There are lines of credit and installment loans online that offer quick and simple ways to borrow.
If that sounds like something you might need, you can read this to learn more about online loans that don’t require prime credit scores. An installment loan you find online can act as a backup to your safety net in case you’re stuck paying for something before you’ve built up enough savings.
Having a contingency plan for every scenario is just good money management. Even if you don’t need to take out an online loan, knowing you have the option can take some of the pressure off your finances.
With fewer anxieties looming over you, you can devote your entire focus on whittling down your expenses. Make your goal to save the equivalent of at least six months of expenses in your savings account just in case.
Don’t let this figure intimidate you. With determination, you can get there, even if it’s later than most!