The initial step in this process is to comprehend the idea behind an emergency fund. An emergency fund is reserve money that you simply have secured for the sole aim of helping you sustain your normal life throughout the emergencies that could happen in your life. More often than not, you should not use this money at all, you let it keep there and accumulates a small interest and waiting until you need it. You can use this fund when you lose your job, for a car repair or whenever your appliance breaks down.
Importance of emergency funds
Very often, those who do not have an emergency fund identify the concept of saving money as a big punishment. They consider this as dead money that can be used for daily expenses. In fact, it is really the opposite – saving, money as an emergency fund simply means that you have sufficient room to breathe. You do not have to contact your friend or a private lender and borrow money to repair your car or you lose your job or need a hot water heater repair. It is also a great way to save lots of money in terms of interest on credit cards. Squeezing your credit card a lot for such expenses is not a good remedy.
Set your initial target very low
It is pretty much important to understand, the initial step of this program. Lots of people, as usual, set a big target for their crisis fund right off and find it very difficult to maintain. If you are a person living with minimum salary, it is impossible for you to save lots of money from the beginning as an emergency fund. You should set your emergency fund as $250. This is your first goal to achieve. You need to set a time frame, say 10 months to reach that goal. If you could save $25 every month, then you can make it within 10 months. Remember that making, saving is a slow process and it will take many days to grow. That is why you need to be realistic in setting your emergency fund goals.
How to find funding?
If you are a person living on a limited monthly budget, your best bet is to save coins. For instance, you can quickly collect reasonable dollars using coins in a month. You can put the money in a jar and at the end of the month deposit it in your bank account.