Building an Emergency Fund In The Middle Of a Pandemic
The ongoing global pandemic has closed down businesses, caused massive job lay-offs and slowed down the economy of many countries all over the world. During these times of uncertainty, a financial safety net — specifically an emergency fund — can make the difference in helping you navigate this rough period.
If you still have a source of income right now, take this opportunity to create a rainy-day fund.
Here are six suggestions to push you into kick-starting your emergency savings:
1. Create a Budget Plan
Create a Budget Plan
The general rule when building your emergency fund is to save at least six months’ worth of your monthly expenses. This, however, may not be a realistic goal for some, as they have to contend with reduced salaries and working hours.
If you’re in this situation, determine how much you’re earning, saving, and spending. Grab a piece of paper or open up a spreadsheet, and note down the following details:
- Monthly salary, which should include overtime pay, allowances, performance bonuses, and other incentives you receive regularly
- Fixed costs, such as monthly personal loan payments, rent expenses, food, insurance, and household and personal care essentials
- Flexible costs, such as vacation trips, dining out, and cab rides
Then, determine how much money you can realistically set aside each month. You could, for instance, start with a smaller goal, such as $250 or $500. As you get used to saving, bump up that value until you reach your desired emergency fund goal.
2. Cut Back on Discretionary Spending
The next step involves reducing flexible costs. During these difficult times, every penny or cent counts. Here are tips to help you dial back on discretionary spending:
- Cancel subscriptions you don’t frequently use. If you haven’t launched your streaming mobile apps for a while now, consider canceling them to save money.
- Shop at a grocery and whip up delicious meals at home instead of ordering in or dining at a classy restaurant. If you are going to cook, make sure that you choose recipes that don’t require costly ingredients.
- Eat fewer expensive and fattening snacks. Your savings account (and body) will thank you later.
- Cancel gym or fitness center memberships. If you want to satisfy your workout regimen, exercise indoors. You could watch home workout videos on YouTube to help you stay physically fit without hurting your wallet.
- Use public transportation instead of riding a cab or using a rideshare app. Also, ask your boss if you could work from home.
3. Choose Where to Place Your Emergency Fund
You should place the money for your emergency fund in a separate account. Using a single bank account will encourage you to deplete your emergency savings to purchase items you don’t need.You should place the money for your emergency fund in a separate account. Click To Tweet
As much as possible, deposit your emergency cash on a savings or a money market account that you can access easily without penalties.
4. Automate Money Transfers
An effective way to boost your emergency fund is to do it without thinking hard about it. Log on to your online or mobile banking platform and move a portion of your salary into your designated savings account. This set-and-forget approach will help you reach your savings goal in no time.
5. Generate More Income by Taking up Side Hustles
If possible, pursue a side job to help you increase your take-home pay. Search for work-from-home gigs on the internet and earn extra money during your free time or outside your working hours. Just make sure that your employer is fine with you taking a side hustle.
A few side gigs you could consider are the following:
- Virtual Assistant (VA) – This role is ideal for individuals with solid communication, business writing, and administrative skills. Some responsibilities of a work-from-home VA include setting appointments, data entry, planning events, and managing social media accounts.
- Translator – Know more than one language? Put your skills to good use by applying as a translator. Businesses and organizations across the globe are in search of talented individuals who could translate and proofread documents.
- Customer Care – Some companies have moved most of their operations online. They may need virtual service representatives to resolve customer complaints and queries. If you have excellent communication skills, consider taking up this side hustle.
6. Beef up Your Emergency Fund Using Unexpected Financial Windfalls
If you’ve received money when you least expect it, use it to increase the balance of your emergency fund. Investing your tax refund, performance bonus and holiday cash gift will help you reach your savings goal faster.
These six financial tips will help you build your emergency fund during these times of difficulty. When you do use this fund for emergency purposes, remember to replenish the money you’ve spent.