- New data reveals that many Americans are sorely lacking in savings.
- Your goal should be to save enough to cover at least three months of essential bills.
Talk about a dangerous financial situation.
You never know when you might lose your job, need to replace your car, or get stuck with an expensive home repair you can't put off. That's why it's so important to have a solid emergency fund.
Ideally, you should have enough money in your savings account to cover three to six months of essential living costs -- things like your rent, car payment, utility bills, and food. But according to Salary Finance's 4th annual report, almost one-third of U.S. workers don’t have at least $1,000 in liquid savings or a cash buffer in their checking accounts. And that percentage rises to 41% among those who consider themselves financially stressed.
If you don't have $1,000 to fall back on, you're potentially one emergency away from landing in debt or suffering other unwanted financial consequences. Here are some steps you can take to ramp up your savings.
1. Reassess your spending
Perhaps you've truly done your best to minimize expenses and only spend money on essentials. But if you haven't yet tried trimming the fat, make that effort.
Go through recent bank and credit card statements to see what your monthly spending looks like. Then, identify areas you can cut back on. That could mean canceling cable and replacing it with a streaming service at one-fifth the cost.
Once you've done that, set up an actual budget so you can account for every dollar you spend and earn. And be sure to put a line item in your budget for savings so some money lands in the bank every month as your paycheck comes in.
2. Bank any windfalls you get
You may come into extra money during the year. A lot of people recently filed their taxes, for example, and are just waiting for their refunds to arrive. That's money you could put right into savings to boost your balance.
Similarly, you might get a bonus at work or a cash gift from a relative for your birthday. You might even win a cash prize at one point -- say, by participating in your kids' soccer team's raffle. Even if it's a small amount of extra cash, it pays to put it in the bank.
3. Get a side job
Your paycheck from your regular job may be maxed out, especially these days, when inflation is making living costs so expensive. But if you pick up a side hustle, you can use your extra earnings to boost your savings and buy yourself some protection against emergencies.
There are many, many side hustles you can choose from, so a good bet may be to set a specific income goal and then find a gig that aligns with it. If you want to earn $60 a week to grow your savings at a decent pace, and you can make $30 an hour tutoring, you might try setting up two hours' worth in your spare time each week to meet that goal.
You may not have a complete emergency fund just yet. But if you don't have enough cash at the ready to cover a $1,000 unplanned expense, it means you have some work to do. Use these tips to grow your savings -- and buy yourself the peace of mind you deserve.
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