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Having savings may seem like a luxury but it is something you should consider essential in life. The aim should be to have between three and six months’ worth of expenses. The idea is that if you lose your job or have a sudden large expense you’ll be able to pay to without needing to borrow money.
This is important as every time you borrow money you make it more difficult to prepare for future emergencies or retirement.
Fortunately, there are several simple steps you can take that will help you to build your savings and create that all-important emergency fund. Don’t forget, once you’ve got the emergency fund, keep saving, you’ll appreciate it later in life.
The simplest and most effective trick is to save first. You’ll need to create a budget that allows you to see your current expenditure and income. This will help you to see where you can cut costs and cancel subscriptions. If you haven’t used it in six months cancel it.
With that resolved you’ll be able to set a saving figure that still allows you to enjoy life. Once you’ve decided this you can create a standing debit that moves it from your account to a savings account the moment you get paid.
You’ll want to find a high-interest account that helps you to build your savings. It’s surprising how much difference the right account can make.
Separate The Funds
The best way to ensure you have an emergency fund and savings is to open separate accounts for the two things. You can then split your monthly savings funds and ensure you’re building a cash reserve for any eventuality.
This is also important as it decreases the likelihood of you touching your savings when you have an unexpected bill.
The emergency fund can be set at 3-6 months worth of expenses. Once you reach this you’ll be able to redirect all your funds into your savings account, which will help this grow.
If you’re worried that it will take a long time to build the funds, especially the emergency then consider what items you have that you no longer need. Selling just a few unused items can make a huge difference to your fund, it may even be enough to create the fund!
If you look around your home you’ll find there are plenty of things that you’ve held onto but don’t actually use.
Take An Extra Job
A great way of increasing your ability to clear debts and save is to take a second job. There are plenty of opportunities for part-time work and you can funnel the earnings directly into your savings account.
Again, this is a great example of forgetting it exists and therefore saving better.
Don’t forget, while creating an emergency fund should be your top priority, it’s more important to clear debts before you start the savings account. Focusing on clearing debt, with the backup of an emergency fund will give you a surprising amount of peace of mind.
The post How to Build Your Savings and Increase Your Emergency Fund? appeared first on MoneyMagpie.