Do you have extra cash for emergencies? A fund ready to be used in case unexpected expenses suddenly occurs?
Unfortunate circumstances do happen, we cannot predict what the future holds so it is always best to be prepared. This is why having a readily available fund is essential so we could deal with what life may bring. But how do we actually make great money in a short period of time?
Follow these simple steps to help you set goals and take steps towards creating a short-term bundle of cash immediately.
Step 1: First is to estimate the amount you spent for yourself and your family on a monthly basis. How much will you be spending in a month from basic needs (food, mortgage payment, electric bills, transportation costs, etc.) to other expenses?
Step 2: In the event of losing a job – Heaven forbid that to happen, how much money will you need while looking for a new job? The amount you need to add up depends on your estimated job hunting expense and how long you expect to be looking for work.
Are you done computing? If yes, then you finally have the amount of money you need to stash in your emergency savings account.
Step 3: Think of other cash expenses you needed other than what stated above. What else? Renovation of the house? Dental check-ups of the children? Maternity check-up? An out of the country trip perhaps?
These things are non-emergency expenses but you can still add this future plans on your short term savings account too.
Step 4: Once you settled every little detail, come up with how much money you are willing to allot to reach the amount you calculated. Consider this as one of the “must pay expenses”. Remember, emergency expenses happen unexpectedly and it won’t wait until you’re convenient.
Prioritize your emergency savings so that when unexpected situation happens, you have a stash of cash ready to be used.
Step 5: Park your money somewhere that you’ll quickly get your hands on it. That is why it is called emergency fund savings.
Here are some:
- High yield savings accounts
- Money market accounts
- Money market mutual funds
Liquid investments such as a certificate of deposit (CD) which offers a better interest rate on your money would fit for those non-emergency expenses you list a while ago.
Step 6: Do research to avoid online fraud and compare various investment types over the internet. Bankrate.com and iMoneyNet will help you on the best national rates and money market funds.
Determine the following:
- Available interest rates
- Time frame applied to the rates
- Relative returns for equal time frames
- Fees for purchasing and maintaining the investment
- Minimum investment required for a particular interest rate
Emergencies happen, it is like a thief that strikes when you least expect them. It is important to act now and start your emergency savings account today. Saving today can help you avoid borrowing a great amount of money in the future and will prevent from having future debts.
If you aren't a fan of saving then you can talk to your employer for possible automatic deduction or transfer of an amount from your regular account to your short-term savings account.