$400? On the face of it $400 doesn’t sound like very much money. Most people earn a lot more than that in a week. But let’s suppose you suddenly had a $400 financial emergency like a car repair? How would you pay for it? This is a question that was recently posed by the Federal Reserve. What it found is that 52% of people would need to either sell something or borrow the money to meet an emergency of just $400.
In other words, the majority of us don’t have $400 in a savings account that could be used to cover an emergency. Just consider this for a minute and the number of things that could happen where you would need access $400.
To be fair
To be fair we understand there are situations where there’s a good reason why a person might not be able to handle a $400 emergency. For example, a person could have lost his or her job and simply gone through all of their savings before hitting that $400 emergency. Or maybe a person is earning so little that he or she is struggling just to get from paycheck to paycheck. However, the underlying problem here is that people are often just unwilling to look past tomorrow. They think of an emergency fund as a needless luxury.
How to build a cushion for a financial emergency
This is the big question – how can you build some savings so that you will be able to handle a financial emergency? Most experts believe that you need to have between three to six months of your living expenses in an emergency fund. So, if it costs you $2000 a month to live then theoretically you should have $6000 to $12,000 in your emergency fund. But if you’re making a low to middling salary the idea of coming up with that much money altogether in one lump sum is going to sound overwhelming at best and impossible at worst.
It doesn’t make you a failure
If you don’t see any way to have three months of your living expenses salted away for an emergency that doesn’t make you a failure. According to another survey, this one done by the website Bankrate, a majority of us can’t fund a $500 financial emergency from our own savings. Given the fact that most emergencies cost about this much money what makes sense is to build up an emergency fund with $500 as a start.
Ways to create a $500 emergency fund
Believe it or not there are a number of different ways to save up that $500 to stick in your emergency fund. It might be as easy as just finding just one bill you could cut. For example, Republic Wireless has cell phone plans for as low as $10 per month. If you are currently paying $50 a month you could switch to Republic, and stash the $40 you’ve just saved in your emergency savings account every month. How much are you paying for your TV and Internet? Chances are that, if you do some comparison shopping, this is another area where you could cut your costs.
Earn extra money
If you want to get that $500 saved up in a hurry the fastest way to do it is to find some way to earn extra money. There are numerous ways to do this. You might be able to get a part-time retail job working for a Staples or Office Depot or Walgreen’s. A really good side job is driving for Uber or Lyft as you literally get to set your own schedule and hours depending on how much money you want to earn. All you need to drive for one of these companies is a clean record and the ability to treat people courteously.
Just start saving money
You should be able to save some money each month even if it’s as little as $20. Surely you could find some way to tuck away $20 a month. If you just saved the change you have at the end of every day you could save up that much. While $20 may not sound like much money you’d have $100 to fall back on after five months. You could use this as a starting point and build from there. Once you have $100 saved you’ll have created momentum that should help you save even more going forward.
Look for other ways
These are just a few of the many ways that you could get money to build up a cushion to fall back on. The important thing is to just pick one and get started. When you do this and then follow up with a second step you might be amazed at how quickly you’ll reach your goal. Plus, you should be able to sleep a lot better at night because you’ll no longer be worried about how you would cover that $500 emergency.