- A good bet is to have an emergency fund with enough cash to cover three to six months of bills.
- A recent survey reveals coming up with $500 on the spot would be a challenge for almost half of Americans.
That's not a very promising statistic.
You never know when a surprise bill might land in your lap, or when you might encounter a scenario that leaves you desperate for cash. Imagine you're a homeowner. There are a host of things that could go wrong, from your roof springing a leak to your air conditioner dying on you in the middle of summer. And in those situations, you may have no choice but to act quickly to address the problem at hand.
There's also the potential for job loss -- either total or partial -- that you can't discount. The pandemic taught a lot of people that lesson the hard way.
That's why it's important to have cash reserves at the ready. In fact, you should really aim to have an emergency fund with enough money to cover three to six months' worth of essential bills. But according to the 2022 Personal Capital Wealth and Wellness Index, only 53% of Americans are in a position to handle an unforeseen $500 expense without worry.
That means that almost half of Americans couldn't easily come up with $500 on the spot. If you're part of that group, it's imperative you take steps to boost your savings account balance. Here's how.
1. Get on a strict budget
Following a budget is a great way to keep your spending in check and free up cash for savings purposes. And it could be your ticket to boosting your savings somewhat quickly.
If you don't have a budget in place, figure out the best way to go about setting one up. That could mean busting out a notebook and listing your expenses on paper, or it could mean tracking your spending on a spreadsheet.
It also pays to play around with the different budgeting apps that exist. The upside of going this route is many of those apps will link up to your bank account and credit cards so purchases you make are categorized automatically, making it easier for you to monitor your spending and stay on track.
2. Get a second job
If you're seriously lacking in cash reserves and already live frugally (so that even with a budget, your spending may not decline all that much), then a side hustle could be your ticket to building savings more quickly. The gig economy is loaded with opportunities to make extra money on top of your primary paycheck, so it pays to look around or even experiment with different gigs.
You may, for example, start out by working retail shifts on the weekends, only to realize that doesn't fit well into your schedule. If that's the case, there's no reason not to try out a more flexible side gig instead.
3. Bank your bonus cash
You may come into extra money during the year, whether it's a tax refund or a gift. It can be tempting to spend bonus cash, but if you're short on savings, putting it in the bank is a better bet. Doing so might also take some of the pressure off if you're working a second job to build savings and want to cut back on your hours temporarily.
A solid emergency fund could ensure your financial security and help you avoid a host of unwanted consequences, like dangerous debt, in the event of an unplanned expense. If you have some catching up to do on the savings front, be sure to employ these tips. The sooner you complete your emergency fund, the better you're apt to feel about your finances on a whole.
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