Thursday, September 27, 2012

Strategies for Building Up/Creating an Emergency Fund

Oh no, the cat has to go to the vet, and the money just isn't in your checking account this week.  What can you do?  Rely on your emergency fund.  Don't have one?  You're not alone.  According to CashnetUSA, a quarter of Americans have less than $100 in an emergency fund.  In today's dollars, that's not a lot of dough stashed away for a rainy day.  Here are some ideas on strategies you can use to build up or create an emergency fund for when the rain starts falling...

Pay yourself first.  This is something that a lot of financial professionals hammer home.  Transfer a set amount of money into a separate account that you don't use for anything else other than your emergency fund.  This, ideally, should be done as a payroll transfer if you have the option, so that it never hits your checking account and thus relies on you to make the move.  If you treat that set amount as a bill and not as discretionary income, you will be more likely to actually save that money.  It's less likely to get spent if it's in an account all by itself.  Tip: Stash your fund in an online bank that takes a day or two to effect a transfer.  You're less likely to raid money that doesn't flow as fast into your main account.

Hold a yard sale/garage sale.  Sell off some unwanted and gently used goods to raise a bit of cash and then deposit that money into your own emergency fund account.  Consider it a fundraiser for a worthy cause -- you.  Don't treat the sale proceeds as "mad money", but instead treat them as an opportunity to invest in your financial security. 

Refunds/Rebates.  You've already spent that money, so when that rebate comes back, deposit any rebate checks into that separate account.  For folks who live in states with beer/wine in grocery stores, be on the look out for NBPN/NWPN (no beer purchase/no wine purchase necessary) forms that you can use to reclaim money spent on specific grocery items.  The holiday season also brings many rebates, as does early January.  Take advantage of these only if you'll use the item anyway and then bank the savings when the rebate rolls in.

Rewards sites.  Many rewards sites, such as Swagbucks and Superpoints, offer a PayPal option.   Take a moment and read this post from May, that outlines some rewards sites to consider. I've recently earned  about $30 from Jingit as well, watching ads.  These are things that you can easily do in your spare time while watching TV.

Credit Card Rewards.  Does your credit card offer you the option to take your cash back rewards as actual cash?  Discover does.  You can request a direct deposit to an account of your choice.

Survey sites.  Many survey sites offer payment via PayPal and/or a cash option, though some use other ways to compensate (such as gift codes or actual merchandise).  Sign up for several survey companies and use a separate address from your regular email so that you can keep tabs on the surveys sent to you.  I recommend signing up for companies rated on Survey Police.

Use your talents.  Are you crafty?  Use your talent to open an Etsy store to sell your wares to generate cash that you can stash in an emergency fund.  Can you write?  Launch a blog and monetize or join a site that pays writers for their content. 

Stash your tax return, or at the very least, adjust your withholding.  This year, we used our tax refund to pay for a large portion of a heat pump that we knew needed replaced.  We were aware of the issue last year and thus made plans to use our tax refund to get that home repair taken care of in 2012.  Our tax return went straight into savings, after spending a brief amount of time in our checking account.  If you are accustomed to large refunds, consider earmarking all or most for an emergency fund.  Remember, you went the whole year without that money, so avoid the urge to spend it like mad money.  Consider adjusting your withholding so that you have more money throughout the year in your pay check, and make an pledge to pay yourself a specific amount to stash away for a rainy day. 

Ignore your raise.   When you get a raise, it's OK to rejoice!  However, one way you can build your emergency nest egg is to pretend you didn't get one by having the amount of your raise transferred to your special account. 

Not a coupon clipper?  Start!  Then look at your receipt and pay yourself back for the amount that you saved using coupons. 

Change jug.  Do you have a change jug at home?  Roll those pennies or take your jar to a bank that does not charge you a fee for counting. 

Earn money $5 at a time.   What would you do for  Klondike bar, let alone 5 bucks?  Check out Fiverr to see what others are doing for a $5 bill and come up with a gimmick of your own.  Is someone in your neighborhood desperate for a baby sitter for Saturday night?  Does someone need a warm body to feed Fido while they go away for the weekend?  Can you tutor a struggling math student? lists jobs such as these and more. 

Whatever strategies you choose to use to build up or create that emergency fund, just stick to not raiding that money unless it's a true emergency. 
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