Half of Canadians are living pay check to pay check and are about 2 months away from financial problem Although this article focusses on Canada, it is indeed a worldwide problem. I hear many people saying: "I just don't make enough money to save" while buying coffee everyday from Tim Hortons or Starbucks. Although it starts small, if you can do that you have some space to save.
The pandemic has taught us the importance of having an emergency fund. The ideal emergency fund would cover 3 - 6 months of your monthly expenses. Is it easy to do? No, not per se, but with some budgeting strategy it would for sure be doable. How to build an emergency fund: here are some tips that have worked for me:
Sell things you don’t use
We all have things in our homes that we never use. Spend some time going through your belongings and be honest about what you never use. Don’t be a hoarder like my SO Nathan, who feels that every little thing might come in handy somewhere in our lifetime. Don’t get me wrong, I appreciate the thought, but not only do not we have the space for it, it helped us build an emergency fund faster and more efficient.
Pick up a part time job
Finding a part time job beside your regular work is a great way to get some extra cash to save for your emergency fund and have some extra cash for fun stuff. Especially when you are starting off you need to work extra hard to get your affairs in order, so don’t shy away from some extra work to get ahead. You will thank yourself in the future for your decision as it will give you much needed mental peace.
Check your expenses and reduce these
What was the last time that you honestly checked how much money comes in and how much is spend on a monthly basis? Make an honest budget were you list what your expenses are so that you can see in what areas you can safe. It’s also handy to know how much you can spend on a particular area, like your morning coffees, to avoid going over your set budget.
Save your tax return
I can personally say I always get excited when I get my tax return. It kind of feels like free money. It makes me get the feeling like I can finally get those cute shoes I saw at the mall. But honestly this money can be really helpful if you don't have an emergency fund. Put this money in your account and grow that emergency fund. This will depend however on how much taxes you pay throughout the year. Often as an employee, you will pay sufficient throughout the year over your salary that you will have a bit of a refund at the end. On the other hand, if you are a freelancer, you’ll have to declare that income and pay the full taxes at the end.
Automatically transfer money to your saving account
Pay yourself first; this tip has actually saved my life. Take a percentage of your paycheque and make it automatically transfer to your savings account. It does not need to be a lot of money. Pay your set mandatory monthly expenses (rent, mortgage, electricity etc.) and from what’s left take a bit and save it consistently. That money can go a long way if you are suddenly in need.
We should all save in case of an emergency. We cannot control life, but we can control how prepared we are for it.