Wall Street sustained a major plunge after China’s BlackMonday spread stock market fears worldwide on August 24, but experts advise consumers to treat the bounce back with caution. Ups and downs in the economic and industry cycles are unavoidable, and with 47% of Americans admitting they have little to no savings, there is no better time than now to establish and build an emergency fund.
Nothing can prepare you for a recession or layoff, but money to cover your expenses can help lessen the blow to your budget! Here are 6 tips for creating a cushion to give you peace of mind in these unpredictable times.
1. Track living expenses.
If you don’t know how much you spend each month on the necessities, you can’t plan accordingly. Track your spending for one to three months (use an app like Mint for help) to determine how much money goes toward essentials like mortgage or rent, insurance, food, transportation and utilities. Estimate the monthly average and multiply it by six or nine; this will give you the amount of cash you need to cover your bills for six to nine months.
2. Set a savings goal and plan.
Stashing away extra cash for living expenses will take time. In fact, you may feel discouraged after calculating the total amount you’d like to put aside, since it may seem like an impossible goal. To combat this, devise a savings plan with specific steps to help you reach that target figure, which may include cutting back on Saturday night dinner dates and saving a set amount of money each month.
3. Treat emergency funds as a bill.
When you’re saving for an emergency fund, the goal may be hard to stick to without looming due dates, interest rates or late fees forcing you to pay up. Since there’s no immediate or obvious repercussion for missing your savings goal each month, it’s important to treat it like a bill. Better yet, automate the savings by setting up a weekly or monthly transfer of funds between your checking account and the emergency fund.
4. Slash everyday expenses.
Look for ways to slash your everyday expenses so you can reach your goal faster. For example, you can carpool or take public transportation to cut down on fuel costs. Instead of relying on takeout during the week, prep meals on the weekends and freeze them for quick access on weeknights. You can also try budget hacking, or the process of reducing your fixed expenses by calling up providers and requesting discounts or reduced payments on such things as car insurance, mobile plan costs and cable TV.
5. Get savvier with spending.
Cutting back on your discretionary spending can feel rough at times and can lead to burnout and goal abandonment. To avoid this, find savvy ways to curb your spending without cutting out all the fun. For example, tools like the Coupon Sherpa mobile app offer instant discounts to retail, restaurant and local service establishments. Currently, you can save up to 20% off your check from Olive Garden, or use a Macy’s coupon for an extra 20% off sale and clearance items.
6. Diversify income.
Expanding your income stream will provide protection against the inevitable swings of the economic cycles. Plus, the extra money earned can be used to boost your savings budget and possibly set you up for a new career. Whether you want to turn a passion into a side job or believe your professional skills can help individuals or small businesses through consulting, check out eLance.com and Fiverr to start the process. If nothing comes to mind, tap into TaskRabbit.com where you can help other people with their errands during your spare time for a small fee.
Andrea Woroch is a consumer and money-saving expert for Kinoli Inc. From smart spending tips to personal finance advice, Andrea transforms everyday consumers into savvy shoppers. As a sought-after media source, she has been featured among such top news outlets as Good Morning America, Today, CNN, Dr. OZ, New York Times, MONEY Magazine, Huffington Post, Forbes and many more. For more information, visitAndreaWoroch.com or follow her on Twitter for daily savings advice and tips.