- Having money in savings for emergencies is essential.
- If you're short on savings, here are some tricks for boosting your cash reserves before the end of the year.
- Dramatically cutting your spending and adding a side gig can help.
The right strategy could leave you with a nice pile of cash on hand.
As a general rule, it's important to have money socked away for emergencies at all times. You never know when you might get stuck with a costly car or home repair. Or, you could get hurt out of the blue, and that could force you to miss work and lose out on a series of paychecks -- not to mention get stuck with a pile of medical bills to cover.
Plus, it's important to have an emergency fund in case you wind up unemployed. Workers who are laid off through no fault of their own are generally entitled to unemployment benefits. Those can definitely help make up for a missing paycheck, but they usually won't come close to replacing it in full.
And if you're self-employed, you're generally not entitled to unemployment benefits. So if your income disappears, you may need to live completely off of your savings until you're able to find work.
But as essential as it is to have an emergency fund, now's a particularly scary time to go without one. For months on end, financial experts have been sounding warnings about an impending recession. And if economic conditions decline in 2023, job loss could become rampant.
If you're short on emergency savings at this stage of the year, you might assume that you don't have a shot at building cash reserves in time for 2023. But if you're willing to make the effort, you may find you're able to build yourself a nice cushion over the next couple of months. Here's how.
1. Slash your spending in a big way
Cutting back on spending modestly may not go far if you're sitting on very little money in the bank and you're eager to build savings quickly. But if you cut back on pretty much every non-essential bill for a couple of months, you may be surprised at how quickly your emergency cash reserves start to build.
To be clear, spending zero money on non-essentials is no way to live on an ongoing basis. But is cutting back to an extreme for a couple of months doable? It should be.
2. Work a side hustle
Although economic conditions could decline next year, right now, the job market is still strong, and that extends to the gig economy. Now's a good time to pick up a side hustle -- and bank every dollar you earn from it (minus what you owe the IRS in taxes).
The end of the year is generally a good time to pick up extra work because businesses tend to need extra help around the holidays. So if you start applying now, you may have a second job within weeks.
3. Ask for cash gifts -- and bank them
If you have a good relationship with your loved ones, then you may feel comfortable being honest about your financial situation. And you may feel okay with the idea of asking for cash in lieu of other holiday gifts. That's cash you can then stick into savings if you're serious about building that emergency fund.
Going into the new year with a solid emergency fund could spare you a world of stress. Take these steps to build some cash reserves -- and give yourself the financial protection you need.
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