Did you know the average American is unable to pay for unexpected expenses of over $500? This statistic may be shocking, but it is a sign of the times. The average person has allowed lifestyle inflation to grow out of control since the mid 1990s, and as a result, many American families are spending more money than they earn on a monthly basis. If you find yourself in a similar situation, it is time to build an emergency fund to protect yourself from future financial disasters.
Many financial experts recommend $1,000 as the starting point for developing an emergency fund. You may feel secure with a smaller emergency fund if you earn less than $20,000 per year, or if you are a high income earner, you may wish to bump up the size of your emergency fund. The following advice will help you take several steps to build an emergency fund of $1,000 and beyond.
Why You Need an Emergency Fund
Some financial experts scoff at the concept of an emergency fund. They argue that your money is better applied when invested in your 401k, IRA, or other retirement accounts. Mathematically speaking, there is no disputing this fact; the interest earned on wise investments should always outpace interest earned on savings and money market accounts.
So what’s the catch? While interest earned on solid investments like mutual funds, index funds, or even CDs is higher than savings and money market accounts, these earnings pale in comparison to the devastating effects of high interest rates associated with credit card debt. Simply put, liquid cash in an emergency fund is the simplest way to ensure that you do not waste your hard earned money on credit card debt each time an emergency arises. Everyone should build an emergency fund for this reason alone; peace of mind and increased confidence are icing on the cake!
Emergency Fund Basics
When looking to build an emergency fund or grow an existing fund, everyone should follow a few universal principles. First, you should keep emergency fund money separate from your primary checking account. This will ensure that a sale at Target or DSW doesn’t become an “emergency.” Second, it is best to keep your emergency fund in a high interest bearing savings or money market account. The goal is not to build wealth in your emergency fund; it exists to protect you from going into debt when true emergencies occur.
If having emergency fund money within close reach (electronically or otherwise) is tempting for you, you have options. Opening a savings account with a different bank is one option. Opening an account with It's quick and easy to sign-up with UberEATSmay also be a good move. For those who are unfamiliar with the platform, Digit is a free and secure service that helps you save money each day by transferring only what you can accord directly from your checking account to your savings account. It’s an efficient way to be sure that your emergency fund will continue to grow over time. And you can access your saved funds as soon as the next business day. Click here for more information or to sign-up for FREE.
Build An Emergency Fund – 5 Simple Ways to Save
If you are like many Americans, your current budget may already be stretched beyond comfort, leaving you feeling like it is impossible to build an emergency fund. The tips ahead will offer creative solutions to both increase your income and reduce both necessary and unnecessary expenses so you can quickly build an emergency fund.
1. Review Your Insurance Policies
I get it – reviewing your insurance policies comes in slightly behind watching paint dry in the weekend fun rankings. But it remains the simplest and easiest way to potentially save hundreds of dollars in under an hour.
If you’re like me, you setup your homeowner’s, auto, and life insurance policies long ago and thought you were set for life. The truth is that you should be reviewing your policies on an annual basis, as you could be leaving savings on the table (or worse – you could be underinsured!).
You can receive a quick online quote for auto insurance from Esurance. Most consumers are able to save significantly by updating their auto insurance to reflect their current protection needs. Check out your savings now!
If you currently are paying for whole life insurance, you can potentially save HUNDREDS of dollars per month by switching to term life insurance. With term life insurance in place, you’ll not only save money; you will also increase your overall death benefit if you should pass away while your policy is in effect. If you are in good or fair health, don’t smoke, and are not employed in a high-risk career, you can most likely pick up a $500,000 term life insurance policy for the monthly cost of a few deep dish pizzas. Just be sure that you do not cancel any existing policies until you have replacement policies in effect!
POTENTIAL SAVINGS: $200-400
2. Return and Sell Unused Stuff
The other day I saw a friend advertising brand new clothes with price tags intact for sale on her Facebook page. To my amazement, mutual friends were snatching up these high end clothing items left and right. In some cases, they were paying handsomely!
If you have unused clothing or other items that you no longer use, selling them via social media can be a great way to build an emergency fund in a hurry – and with little effort! Simply lay out items in a brightly lit area of your home, use your smart phone to snap pictures of each item, and upload them in a new Facebook album. Whenever possible, take advantage of your friends’ brand recognition habits to drum up interest.
Before you sell unused items online, be sure to check store return policies first. Depending upon when and where the items were purchased, you may be able to receive a cash refund or store credit, both of which can free up money in your monthly budget. A few months ago, my wife and I were able to return a few unused items for cash even though we had purchased them several months ago; it never hurts to try!
POTENTIAL SAVINGS: $100+
3. Drive for Uber
You work hard during the week, and the last thing you probably want to do is work more on the weekends. I never said it would be easy to build an emergency fund – just simple and fast. If you crave the flexibility to work only when you want to work, Uber may be just the side hustle you need to build an emergency fund!
Most of the time, your car is not an asset – Uber has changed that forever! As long as you have a clean driving record and suitable vehicle, you can earn several hundred dollars driving for Uber. You have full flexibility to set your own hours at the push of a button. Once you get started and earn favorable reviews, you’ll be on your way toward higher earnings in a hurry. It only takes 4 minutes to sign-up and get started!
Take trips for a few hours in the mornings, every night, or just on weekends – you set your own hours. You are your own boss and you can choose when and how much you work. And unlike the standard Uber program, you don’t even need to have car – a bike or scooter work, too, though you’ll likely earn more if you have a car.
It's quick and easy to sign-up with UberEATS, and you can be on your way to making more money soon.
POTENTIAL EARNINGS: $200+ per day
4. Negotiate Better Rates on Phone and Cable Bills
It is true that many companies have expanded training of retention specialists, making it harder than ever to negotiate better rates on phone and cable bills. But if you’re willing to be persistent and step up your game a bit, you can still pull the right strings and save money on these services. Why? It is much cheaper for companies to lower your rates in order to retain existing you as a customer than it is to invest in advertising and promotion designed to recruit new customers.
Connecting with the right people is the key to negotiating savings which are significant enough to help build an emergency fund. Below you will find the best customer service phone numbers to call when negotiating your rates. Remember to be polite, emphasize your history as a loyal customer with the company, and make it clear that you have a promise of cheaper rates with their competitor. Ask them to reduce your rates to match their competitor. If you do not get what you want, politely ask to speak with the representative’s supervisor. You may have to be persistent, but it will pay off!
COMCAST: 1-800-XFINITY – When prompted, say “Discontinue service.”
AT&T Uverse: 1-800-288-2020
POTENTIAL SAVINGS: $100+ per month
5. Pet Sitting
If you love pets and are willing to welcome four-legged visitors into your home, pet sitting and walking can be a fun way to build an emergency fund. In fact, you could earn $1,000 in under a month! A few of my friends registered with Rover.com and list their dog walking and sitting services on their website. Because they are clearly dedicated to providing safe, loving dog care in a hospitable home, they have been very successful.
To get started with Rover, visit this page and fill out the brief form. From there, you’ll be directed to create a profile, upload pictures, and complete a background check. The Rover team will manually review your application within one week, and once you are approved, you can begin accepting requests and start making money! Rover is active in over 10,000 cities nationwide, and you can easily set your own schedule and rates using their site or app. It is the easiest way for animal lovers to build an emergency fund!
POTENTIAL EARNINGS: $1,000+ per month
Don’t allow yourself to continue on without an adequate emergency fund. Financial emergencies are bound to happen in life, but you can protect yourself and your family when you build an emergency fund. By updating your insurance policies, automating savings each month, selling or returning unused stuff, driving for Uber, negotiating phone and cable rates, and becoming a dog sitter with Rover, you can save and earn $1,000 in a hurry. What are you waiting for?