This post could really change your financial life because: you know, I know, and everybody knows that anything can happen in any second, we just don’t have control over chances.
We all work hard because we all want to be financially stable or achieve financial independence but only a few actually follow the right path of acquiring that status of financial stability.
Let me tell you a secret, it is not just about budgeting, proper investing, or best financial habits, but also about having a safe net that can help you in any financial crisis. The three above do not go well without having an emergency fund… But Why?
Well… The answer is actually simple. If anything were to happen to you (knock on wood three times…) today or tomorrow like losing a job, getting kicked out, or any other disastrous event that might disqualify you from an income earning potential for even one month should be covered by your emergency fund, not to mention 3-6 months.
Here’s simple example: your job requires lots of walking and you were to break your leg and your doctor tells you that you will not be able to walk for at least 4-months. Ask yourself, what do you do in this case?
I want to help you to avoid financial crisis if it were to come your way and develop a pretty nice emergency fund within the next six months to a year.
Let’s get started.
#1 Get Started With Your Budget
The first most important step is to create a budget if you don’t have one yet. You need to figure out all the numbers, income from all the jobs, spending, (insurance, food, rent, mortgage,etc…) and everywhere where your money go. Don’t try to do it in your head, write it down on a paper and look where you need to improve. One of the great websites to use is Mint for creating your budget list.
#2 The Important Part is to Start Putting Money Away
If you start today, you will already have $5 or whatever amount you decide, so this puts you in a much better position than majority of people. I really hope you are not living paycheck to paycheck because if you do, then you need to work on your income and get extra jobs on the side for some side income. Check out top picked survey or jobs that you can get for some side income if you can’t get a real job sites where you can actually make money. All it takes is to actually start, something is better than nothing already.
#3 Best Alternatives Out there and My Suggestions
Here’s the best alternative and I believe this is the best thing you can do for yourself to create emergency fund. Instead of opening some random accounts or putting penny in piggy bank that are not going anywhere and if you put $30 a month, it will still be $30 per month.
Best Alternative that I actually do right now.
1st alternative: Open Acorns that gives you free $5 or Robinhood account that gives you a free random stock and connect your credit, debit cards to them. This way, you can set amount you want to be invested and then that whatever amount you set will actually grow over time, plus you contributing to it will make it grow even faster.
2nd alternative: Opening an investment account is relatively easy and if you don’t have an investing account, maybe its time to open one as well? If you are not ready for one, that’s fine as well. Opening one for emergency though could provide same benefits as the 1st alternative where your money is actually growing.
Open an investing account with M1 Finance (you only need $100 to start) and contribute to it monthly and not only you are contributing but it will also grow by itself therefore your emergency fund might become so big that you will turn a portion of it into investment.
Posts You Might Find interesting
Personal Finance Books You Absolutely MUST Read in Your 20’s
Ways to Earn Extra Money while Working Toward Degree
Building a Great Credit as a Student Tips & Tricks
Get Free $5 by signing up with Acorns
Top 10 Highest Paying Jobs that Don’t Require Degree
Answering Most Asked Question: “What to do After College?”
T-Mobile Review and Why it is Best for Every Age
Richard Barnett is a student majoring in finance, entrepreneur, marketer, content writer, budget traveler, and financial blog “Student Money Adviser” owner. You can read more about me here.