Living on a low budget.
Really, it’s not always easy to turn around every penny. You get tired of it if you always have to say no and can’t do anything. You feel that it will not end and you will always have to live like that. And if you just keep hoping that there will be more work, more income and more freedom and it will never come, it would make you moody and depressed.
But I’m convinced that everything stops once, that this also passes and you can close this period. But until that time you have to keep your head above water and ensure that you don’t go under it.
The first step:
An Emergency Fund
Although it’s not easy to save money when you live on a low income, it’s still very important to start saving for your emergency fund.
I think it’s very important to have an emergency fund. The percentage that doesn’t have an emergency fund is about only 26 – 30%. They get in trouble when they need money fast. Only 40% of families have enough in savings to cover three months of expenses, with an even lower percentage having the usually recommended six months worth of savings. These are frightening numbers, as having an emergency fund can greatly help a person get through tough parts in life.
I’m always glad that I make sure that there is enough money for me when my car is broke, I have to go to the vet with my dogs or another emergency. Without this emergency fund I would really be in big trouble.
Why an emergency fund?
There are many reasons why you should have an emergency fund.
- If you lose your job an emergency fund can help you get through the first time you are without your job. It can happen to everyone, don’t think it would not happen to you. Just be prepared if it does happens.
- Do you have a great health insurance or not? If you don’t having an emergency fund is very wise.
- Do you have a car? What if something is broken? Do you have the money to pay the garage? Save money in your emergency fund for your car. Do you have money for another car when your car is broke and can not be fixed anymore?
- Do you have a own home? What if you have an unexpected home repair? Your emergency fund can help you with this.
- Do you have pets? What if you need to go to the vet. The bills are mostly very expensive. Another reason for you to make an emergency fund.
If you read this reasons why you should have an emergency fund you probably know that it’s good to have one. It will give you peace of mind knowing that you can afford this unexpected costs.
There was a time when I didn’t have an emergency fund. I couldn’t sleep of the stress it gave me not having money for emergencies. I was always afraid that something would happen and I didn’t have the money to fix it.
For me that’s the main reason why I have an emergency fund and why I believe you should have one too.
It’s time you are going to worry about other things then financial problems.
An emergency fund is also wise to have because it can help prevent unnecessary debt. There are too many people out there who count on their credit cards as their emergency fund and that is not a good idea. It can lead to debt spiraling out of control because of high interest rates.
Below is what you need to know about emergency funds for when you need money fast.
Should you have an emergency fund if you are in debt?
Yes, you do! You should have an emergency fund even if you have debt. If you have debt, then the usual recommended amount is to have $1,000 in your emergency fund before you start paying down your debt.
After that amount, you need to determine what you are comfortable with.
Most people will think that you start with paying of debt first, but how are you going to pay the vet, the car repair or another emergency. Right! You are going to make more debts and that’s the one thing we don’t want anymore. You will have the feeling that you will never go out of debt this way.
How much money for the emergency fund?
How much money is up to you. If you don’t have a car, no pets and your rent your home then you need less. If you do have those things you need more in your emergency fund.
Do you have debts? Then you save $1000 and then you start with paying of debts. If you don’t have debt, then I usually recommend at least three to six months of expenses.
If you are self employed you need to think about what you need if business is going down.
How can I save enough money to fully fund my emergency fund?
After reading all of the above, I bet you cannot wait to start your emergency fund.
It may be hard in the beginning to start saving for your emergency fund, but everyone has to start somewhere and it’s always best to be prepared for when you need money fast. You can save money for your emergency fund by setting out a certain amount out of each paycheck, or you can work towards making extra money so that you can build up your emergency fund even quicker.