10 Practical Ways to Save For Emergencies or Big Expenses
We all know the feeling: at the end of the month we look at our savings account and it's completely wiped out! All our income went to daily expenses, and we have nothing set aside for emergencies or big expenses like tuition. Here are some of the best tips for parents to be able to save money.
What are you saving for?
An emergency fund is money that is set aside for unplanned situations like medical expenses, job loss, house repairs, car repairs, or calamities. Ideally, an emergency fund -- especially if you have a family -- should be 6 months’ worth of your household income.
To build your emergency fund, here are 10 tips to get you started.
Track your expenses
One way to determine your capacity to save is to track your expenses. You can use a handy notebook if you’re a pen-and-paper person, a spreadsheet, or an app. By listing down your expenses, you’ll know where your money goes. It will be a revelation that even the smallest splurges or overlooked costs can add up to a significant amount.
Set your financial goals
Financial goals are important so that you can create a financial plan. By focusing on your goals, you’ll know what to prioritize when making a budget. Think of all the things you put off because you didn’t have the money. Setting aside P500 or P1,000 every pay day can help you achieve those dreams, one small step at a time.
Make a budget and get everyone involved
Planning your family’s budget can be difficult, especially if you are considering the needs of your family members. Schedule a family meeting, with a specific day and time. Discuss why you need to set a budget, let them know about your financial goals. It’s also a great way to hone your kids’ financial smarts as early as now.
Cliché as it may sound, you may have heard about the 80-20 rule wherein 80% of your income goes to expenses and 20% goes to savings. But for families on a really tight budget, is it an excuse not to save?
Gracie Maulion of TipidMommy.com shared her suggestion. “Save a small amount consistently, instead of waiting for a big break to start saving money. We can start saving with any amount that's possible on our income. Saving a small amount consistently is better than having no savings at all.”
Evaluate and make sacrifices
This is why listing down your expenses is a very important step in financial planning. You have a clear view of your spending habits and you can now take control. You can see how much you spent on coffee, Grab rides, Netflix and Spotify subscriptions. Take some time to evaluate your expenses and get rid of unnecessary ones. That’s additional savings for your emergency fund.
Challenge yourself and make it a habit
There are challenges out there, like 50-peso money challenge, no eating out at restaurants for a week, etc. Do it now! You can try it alone and track progress with a journal, or get several friends involved. These are fun, yet helps you save money while still making you feel satisfied and fulfilled.
I think the reason why challenges are effective is because it helps you break a bad habit and start a good one. They say it takes 21 days to start a habit, so try any challenge that lasts for 3 weeks or more and start making powerful financial changes.
Live healthy and quit vices
How much is a pack of cigarettes? How much do you spend on alcohol in a bar? Quitting these vices hits two birds in one stone. You get to save money because cigarette and alcohol expenses will be eliminated from your budget. At the same time, you get to save money from medical expenses should illnesses from smoking or drinking arise.
Find other sources of income
Think of your passion or hobbies like baking, sewing, cooking, writing, selling, etc. You can make income out of your passion and succeed from it. The money you get from your sideline can go straight to your emergency fund.
However, start small. Don’t buy a lot of supplies or materials yet! Many successful entrepreneurs started out by selling to friends or co-workers. If you’re selling a service rather than a product (ex: writing, tutoring, carpooling, making costumes) do a trial run so you know the expenses and logistics, before launching it as a home biz.
Stop using credit
It’s weird to have an emergency fund and yet pay a huge amount of interest on credit card debts. As you control your daily and monthly expenses, prioritize paying off debts. If necessary, call your card provider for a debt-restructuring plan. In the meantime, stop using credit cards and pay for your regular expenses in cash.
A minimalist lifestyle proves that less is more. Sometimes, owning a lot of things means additional expenses. If you have two cars, then that will be twice the maintenance costs, car registration costs, and fuel costs.
Be patient, persistent, and positive
I hope these tips can help you achieve your financial goals sooner. Little changes can go a long way, and when you are discouraged, remember you are doing it for your family’s future. There will be months when you are able to save, and months when you feel you are climbing an uphill battle. Just focus on what you want to achieve, and remember – whether you save P50 or P5,000, the point is that you are creating a “saving mindset” that will help you overcome any obstacle.