We're told we're supposed to have money on hand for a rainy day, but when it comes to emergency savings, a large number of Americans need to do better. In fact, 40% of U.S. adults say they don't have the money on hand to cover a $400 emergency, according to new data from the Federal Reserve Board. Rather, to pay an unexpected bill in that amount, they would need to borrow the money or sell some belongings to scrounge up the cash.

Now, on the one hand, this is an improvement from the 47% of Americans who couldn't cover a $400 emergency a couple of years back. But it still paints an extremely troubling picture.

Man looking at a document with a worried expression on his face

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If you're lacking in emergency savings, it's time to take steps to build your safety net rather than allow yourself to continue walking around vulnerable. Otherwise, you risk racking up major debt the next time an unplanned bill lands in your lap and damaging your finances irreparably.

How much savings do you really need?

Your emergency fund is supposed to have enough money to cover three to six months' worth of living expenses. If it has less than $400, it means you're nowhere close to having adequate reserves. Therefore, it pays to sit down and make a list of your non-negotiable monthly expenses, like food, rent, and electricity, multiply that figure by a minimum of three, and set that as your target savings goal.

Building your emergency fund

An emergency fund isn't the sort of thing you can establish overnight, so if you're sitting there thinking it'll take months, or even years, to accumulate enough cash to cover three to six months of expenses, you'd be correct. But don't let that discourage you from making small but consistent strides.

Begin by creating a budget if you don't already have one so you can see where your money is going. To do so, simply list your existing expenses (including sporadic expenses that don't necessarily pop up every month) and compare them to your earnings. If there's no room left over for savings, you'll need to cut corners.

Which expenses should you seek to reduce or eliminate? It depends on what's most important to you. If you don't tend to spend all that much time at home, downsizing your living space is a good way to pocket several hundred dollars a month. On the other hand, if you absolutely cannot live in a smaller home, cut other expenses, like restaurant meals and clothing purchases. It's mostly a matter of setting priorities and deciding which expenses you can give up without drastically impacting your quality of life.

Another way to get closer to your savings goal is to take on a secondary gig, even if temporarily. The benefit of working a side hustle is that it gives you access to an income stream you weren't counting on to pay the bills, and should therefore have no problem socking away. Keep in mind that you don't need to put in 20 hours of side work per week to make a dent in your savings. Even if you're only able to work three or four hours a week at $20 per hour, that's still an additional $60 to $80 (minus taxes, of course) you can put away.

Finally, be vigilant about sticking any extra cash you get your hands on in the bank, whether it's a raise at work, a performance bonus, or a generous birthday gift from a relative. If you make a point of saving that money rather than spending it, you'll be well on your way to building the safety net you need.

Don't risk your future

The more debt you take on, the more money you're apt to throw away. It's that simple. Charging a $400 bill on a credit card might seem pretty harmless, even if your interest rate is high. But know that doing so could kick-start a dangerous cycle where you get into the habit of regularly charging away the expenses you can't afford, and that could mean not only racking up loads of interest but also ruining your credit in the process.

In addition, don't forget that while borrowing money to cover an unplanned expense might be an option now, if you do it too many times, it may not be in the future. So don't put yourself in that position. Save for emergencies, because you never know when the next one might strike -- and what sort of bill it might produce in the process.

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