Evaluating Your Emergency Fund

As Americans begin to recover from the daze and haze that was 2020, one of the biggest things that come to mind is the importance of emergency funds. So many people lost jobs, had hours cut, or were furloughed, and as a result, hundreds of thousands were displaced and struggled to make their rent or lost their housing all together. Others struggled to keep food on the table and relied on food banks and charities, as well as food programs or food stamps to ensure their families were fed. For many, life was a struggle, and their savings accounts were completely exhausted and emptied so that they could stay afloat. Even if you weren’t impacted by the pandemic, having savings set aside for the next big churn may still be weighing heavily on your mind. Let’s explore the practical issues surrounding creating and maintaining a healthy emergency fund!

Finding room in the budget

If you live paycheck-to-paycheck, it may seem near impossible to find room in the budget to save in any meaningful way. That mindset can lead to ignoring the problem completely. Even if you are only able to save $10 per paycheck, it’s still a start! Cut back on fast food, cut down on streaming services, or pick up a low-stress side-hustle to help pad that savings even just a little bit to get you going. Every dollar count, so count every dollar! Buy in bulk or off-brand at the grocery store and see how the savings add up over time.

How much should you have saved?

Before 2020, the standard advice was to have 3-6 months of monthly expenses set aside. In the post-pandemic world? You’d be better off saving about a year’s worth of expenses, or at the very least, a year’s worth of rent or mortgage payments set aside so that you can maintain a roof over your head while figuring out the rest.  That may seem like an insurmountable task, but by starting now, today, you begin the process of securing your own safety and security. And savings doesn’t just pertain to money… As we all saw last year in The Toilet Paper Rush, having a store of household goods, shelf-stable and frozen foods can be a boon when times are tough. Start thinking long-term sustainability and comfort. By picking up a few extra cans of vegetables each grocery trip, you can stock up for those leaner times.

Think Sustainable

In a world filled with disposables, think sustainable. You may spend a bit more upfront for goods but buying better quality products can save you big money in the long run. If you’ve got a product that you find yourself buying repeatedly due to wear and tear, it may be time to think of upgrading to something that will last longer and made sturdier. Those re-purchases can really add up over time! This applies to services too. If you’re spending $100/ month on yard maintenance, it’s time to re-evaluate if you’d be better served doing the yard work yourself. Same goes for pool services, laundry services and even your yearly extermination spraying. If it’s a service that you use out of convenience, weigh out whether your time is more precious than your money.

By trimming the fat and evaluating your current circumstances, you may find there are indeed places where you can trim the fat and save some cash.

Come back next week for more great discussion on finances, savings, and budgeting!