Emergency Fund: Tips for Creating Your Own

Create a emergency fund It is essential to avoid financial losses if any unforeseen expenses arise.

But, if you still don't have experience with this type of reserves, it is natural that you don't know where to start saving.

Taking this into account, in today's material we will present you with some tips to create an emergency fund in a simple and effective way. Continue reading to find out!

Why have an emergency fund? 

It is likely that you have already been in the situation where an unforeseen event arises just at that time of the month when the money has already run out.

The car breaks down, a crack appears in the wall, the dog gets sick... these and other situations raise the classic question: where am I going to get the money to pay for this?

Especially if you live on a tighter monthly budget, this anxiety is perfectly understandable, since the solution is usually to leave an expense open to cover unforeseen events.

In a short time this can become a big problem, since unforeseen events and open expenses appear all the time that take away our peace of mind.

The most effective way to avoid this situation is through an emergency fund, which is a financial reserve intended to cover important unforeseen events.

So, in practice, you set aside an amount each month for this fund, and if a major unforeseen event arises, you use the balance to resolve the problem without compromising your income.

If you want to avoid debt, the emergency fund is the ideal solution, as it helps you save money and also preserves your monthly budget.

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4 tips for creating an emergency fund from scratch 

The idea of an emergency fund is very interesting, but, especially if you live on a tight budget, you may be wondering: where will I get the money to make this reserve?

At first it may seem like a difficult or even impossible task, but with the right strategies it is possible to start, even with a little.

Below are 4 tips to help you with this task.

1. Organize your monthly budget 

In general, when we believe that we do not have money for an emergency fund, the reason is the disorganization of the monthly budget.

This is because, if we evaluate carefully, we will surely find some expense that could be avoided and converted into a reserve.

Especially if you use a credit card frequently, you'll likely end up spending a lot of your income paying the bill, and there are expenses that could be avoided.

Therefore, carry out a detailed evaluation and prioritize the use of your money, as this will make it easier to use part of it for the reserve.

2. Create a plan 

In some cases we notice that even after careful evaluation, our income still does not support an emergency fund reserve.

This especially happens when we have many important expenses that cannot be cut or reduced.

In this case, the best solution is to focus on planning. See an example: 

If when you review your budget you notice that the 10% of your salary is used to pay the fees for dental treatment, and the last fee is next month, how about organizing yourself to turn this expense into a reserve when the time comes? Are the quotas over?

You don't need to create an emergency fund right away. If your income is tight right now, use planning to get started when possible.

3. Don't leave your emergency fund in your main bank account 

One of the biggest mistakes those starting an emergency fund make is leaving the reserve amount in their main bank account.

In most cases, money ends up being used due to lack of attention or convenience.

If you intend to create an emergency fund, it is essential that you open a specific account for this purpose, since it will be more difficult to use the money due to lack of attention.

Remember that the reservation is for important unforeseen events, so a nice bag on sale is not justification for using it.

So save the amounts in a specific account, as this way you will remember their purpose and avoid using them unnecessarily.

4. Get in the habit of setting aside part of your extra earnings

Most people look forward to salary increases, believing that this will improve their financial lives.

This would even be possible, if they didn't end up increasing expenses even more, without worrying about reserves. So in the end everything remains the same.

If you want to avoid this situation, a good tip is to create the habit of setting aside part of all the extra profits.

So if you received a raise, set aside at least 50 % of that raise for your emergency fund. 

The same goes for windfalls: If you won a prize or even did an activity to earn extra income, try to save a percentage of those winnings.

This way, with little effort you can create an adequate emergency fund to save you in times of need.

Remember that you do not need to have large amounts to start, since little by little it is possible to accumulate an adequate amount for emergencies.

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