Remember your first job? After spending countless hours slaving away ringing up customers or mopping up floors, it probably felt pretty darn nice come paycheck time. Those numbers represented your work paying off with real money.

If you were anything like me, you couldn’t wait to cash that check and spend it all on something you probably didn’t really need.

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You NEED An Emergency Fund

Unlike most of our teen selves, adults have usually tacked on quite a bit of responsibilities. From rent, to groceries, utilities and car upkeep, it’s more difficult now than ever to have anything left over for fun, let alone savings.

Now after all your expenses are paid, you can spend any leftover money on anything you want.

However, a smart investor like yourself knows to start preparing for a rainy day, which means setting aside some cash to keep on hand – just in case.

This involves having money but not spending it.

I know this can be hard. For some it’s really hard.

But it’s also really important. Without an emergency fund, you have no backup plan should you get injured, lose your job or run into an unexpected car bill.

In most cases, people in this situation have only one option. Credit card debt; often which carry high fees and penalties.

You just went from bad to worse.

Lucky for you to have found this article right?

Where’s My Money?

Do you know where your money is?

If you don’t have a budget or know how much you’re spending in a given month you don’t have control of your money,

To be able to save for an Emergency Fund or anything else, you need to know how much money you have at your disposal to save.

Not sure how? If you are also a budgeting newbie – you can check out How To Make A Budget When You Hate Budgeting

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How Big Should Your Emergency Fund Be?

One important reason you need to make a budget? You will then know your monthly cost of living, which will help you determine how much you need to save.

A good rule of thumb from experts is to build for six month’s worth of living expenses. This includes all essentials: rent, bills, groceries, gas. Anything you must pay for in a given month. That way you will be covered in case disaster strikes and you won’t be wondering where your next meal will come from.

But considering the average American has trouble saving even $400, your monthly cost may sound impossible.

For example, in my case six month’s of expenses would come out to around $15,000 – and I live fairly cheaply.

But don’t make a big number into an excuse not to save. Any cushion, even if it’s just $1,000 is better than no cushion at all.

Where To Keep Your Emergency Fund

Now that you know how much money you need, we need to figure out where you’re going to put that nice chunk of change.

For some this can be tricky because you need this money to be readily available.

That’s the big reason why saving is so difficult for some. When you can see the cash on a daily basis it makes it extremely tempting to dip into it.

Even if you’re resistant to temptation, unfortunately you can’t do much in the way of earning interest in a high-return account as this usually requires you making money inaccessible for a period of time.

Open a savings account you won’t regularly check, and use that to store your savings. 

Although most savings accounts offer a small rate of return, it’s still better than hiding it under your mattress. Some interest is better than none!

One way to get around the low interest is to also take advantage of account bonuses. Some banks will allow you to sign up to open a new checking account. That way you can still gain that interest you crave.

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Save Save Save!

Once you have an emergency fund in mind, figure out how much you’ll need to set aside each paycheck to reach your goal.

Then direct that money in your emergency account via direct deposit or automatic transfer after each payday.

Small contributions make a big difference. If you save $25 a week, you’ll have $600 in six months. Not too shabby right? 

You will probably want to be more aggressive than that though. Emergencies often happen at unexpected times and it’s important to be ready. Some easy places to start are cable, eating out, clothes and alcohol.

Make sure to track your progress to keep yourself accountable! Places like Mint do a good job at showing you your income and expenses. Plus it’s nice to be able to see your emergency fund grow.

Saving Too Difficult?

One easy way to start saving if the above methods don’t work is to use automated savings apps that round spare change and deposit it into a savings account. I highly recommend Digit.
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Digit is an easy way to save as it evaluates  your spending and automatically takes small deposits out of your account.

Another good trick? Sock some cash into a empty wine bottle. You have to break the bottle to get to the cash so it’s pretty hard to spend it on that brand new pair of shoes you’ve been eyeing.

THE Most Important Part? DON’T TOUCH IT

Now that you successfully have your emergency fund in place, don’t ruin your accomplishments by spending it all.

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You’ll thank me later. I promise you.

Congratulations! You have just taken your first step toward getting financially fit.

Good Luck, Newbies

Have you started your emergency fund? What strategies worked for you?

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