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|How To Build An Emergency Fund When Times Are Tight|
|Written by Dr. Alonzo Peters|
|Tuesday, 07 February 2012|
When you're struggling just to pay the bills, the last thing on your mind is building an emergency fund. In fact, nearly two-thirds of Americans have less than $1000 in savings. But just because we're having trouble making ends meet doesn't mean fate will pass us by. Washing machines break, car alternators fail, and pipes burst whether you're struggling or not.
So how do you prepare for those inevitable moments of crisis? I asked some of the experts on Twitter.
Barbara Friedberg (@Barbfriedberg) advises people to make the hard choices. "It's worth it in the long run," she says. I completely agree. Of course you may have to sacrifice some of the things you like or have grown accustomed to, but having an emergency nest egg makes it worthwhile. Her final bit of advice: Take it "Bit by bit."
@Singlema suggests people take advantage of the flush times in order to prepare for the lean periods. "In the same way animals prepare for the winter, store up your reserves for when you need them," she advises. This can be as simple as resisting the urge to spend your income tax refund and instead placing it into savings. Bonuses, pay raises, and financial gifts can also spruce up emergency funds.
You don't have to create your emergency fund all at once. Creating your emergency fund is a work in progress. Saving even $20 or $30 a week allows you to slowly build a cushion of financial security. Small simple changes matter. Consider these tips:
Learn to trim the fat.
You may be struggling and think you don't have the money, but ask yourself, have you really trimmed all the fat?
I'm amazed when people complain about the state of their finances but then I see them eating out at KFC or McDonald's. Fast food is nearly two to three times as expensive as home cooked meals.
Super-size your emergency fund instead by cooking at home. If you're pressed for time, cook several meals on Sunday and place them in the fridge or freezer for use during the week. This simple tip alone could easily save you $40 a week.
Likewise, take a close look at the rest of your spending. Scrutinize it with a fine tooth comb.
The truth of the matter is that once you scrutinize each and every expense, you'll discover ways to save that you never even considered before. Put the little "luxuries" on hold....
L. Marie Joseph, author of First Generation White Collar, frequently reminds people of the African Proverb: "Save your money and one day it will save you." When it comes to building an emergency fund no truer words were ever spoken.
Your turn... How do you save for emergencies when times are tough? Share your comments below.