If you’re like most people in the United States, you may be living paycheck to paycheck. This can be incredibly stressful for people, but it’s something that just comes with the late stage of capitalism. If you’re someone who wants to feel safe when it comes to your finances, you may want to consider starting an emergency fund. An emergency fund is money that you put away each month and don’t touch unless you in into an emergency. You can start different funds for different reasons but if you have an emergency fund, this is usually to be used for health or financial hardship.
It’s important to see your emergency fund as savings dedicated to a cause. It’s money that you do not touch if you can help it. If you’re living paycheck to paycheck you probably know what it’s like not to have money when you need it. It’s important though that even if you feel like you need it. You should think hard about using the money in your emergency fund.
Your emergency fund can either be connected to your bank account or it can be connected to another bank account, one that you usually don’t use. While this may seem strange, the reason someone may want to do this is because it’s hard to not touch money. However, of accessing it is harder, you may be able to stop spending it whenever you feel like it instead of later.
Next, you’ll want to look at how much money you spend and create yourself a budgets if you’re living paycheck to paycheck and you don’t have a budget, you’ll definitely want to make sure that you have one so that you can more closely see where your money is going. This is important because small things end up costing a lot more than you think in the long run, and you’ll be surprised about how much you spend on certain items. It’s of the utmost importance that you’re looking at what you have so that you can spend it all in the right places. If you’re a visual learner, try taking some personalized M&Ms and dividing it into your budget so that you can see how much you’re spending on certain items. Divide your spending into three categories at least: food, shelter, other. This is a great way to get an idea of things you need versus things you don’t need.
If you’re able to, it’s a good idea to start off your emergency fund with at least $200. From there, add money every month to build up your money. It’s also a good idea to make sure that you’re getting a percentage taken out of your bank every time you get paid and automatically do that it’s not something you have to think about. If you do this make sure that the amount you’re putting in is at least twenty percent of your paycheck, if you can afford it. Do the biggest amount you can without doing anything too extreme. You’ll be thankful in the future. A good amount of money for an emergency fund is at least $6500. This will cover most emergencies and it will be a great way to take care of you and your family in the case of something happening.