All of us know that sinking feeling of an unexpected financial expense. (And, no, a sale at Nordie’s doesn’t count). We’re talking a dishwasher spouting a leak or a baseball shattering your windshield.
But would you believe that 39 percent of Americans couldn’t cover an unexpected expense of around $1,000? If, like so many of us, you fall into that category, that means scraping up enough dough for your deductible might be an issue. And without ample funds to cover an unexpected bill, many people turn to their credit cards, which means you’d start incurring interest on top of the initial expense.
Accidents happen (I mean, that’s why you have insurance, right?), but they don’t have to set off a cascade of financial issues. Here are 3 things you can do to start saving money today.
1. Know the difference between an emergency fund and a rainy day fund
First off, there are 2 different types of funds you need to eventually build. Your emergency fund is designed to cover essentials if you lose your job and have to live without a paycheck for a few months. And the rainy day fund is what you should tap for those unexpected but spendy situations that crop up, like needing new tires or going to the emergency room.
Both funds should be kept outside your regular checking account (maybe in a savings account) so you’re not tempted to spend the money on day-to-day bills .
2. Start preparing now
Now comes the tricky part — putting aside that money. Most of us aren’t exactly flush with cash at the end of the month, but this is one of those areas where paying yourself first can really pay off.
Commit to putting aside $25, $50, or $100 on a regular basis. And if you’ve received a bonus, tax refund, or raise, that can be the perfect way to contribute a chunk all at once.
Direct deposit can also be your friend since you won’t be tempted to spend what you don’t have. Many employers will even allow you to split your paycheck so that part of it goes directly into your savings.
3. Stay slow and steady
Building momentum can do wonders for your self-confidence. Think in terms of saving just $25 a week (the equivalent of a couple of lunches or movie tickets) to save $100 a month. Before you know it, you’ll have a rainy day fund to help you withstand the elements.
Also on that list: having insurance that’s right for you. Get a free quote from Esurance today.