By Chinkee Tan
If you read my last article, I discussed about the importance of building an emergency fund, which is money you set aside in the case of unforeseen events, like sickness, a loss of job or income, house repairs, vehicle maintenance or breakdowns, and many more.
Some of you might ask, where do I start?
START WITH WHATEVER YOU HAVE
Be willing to start small. The most important thing is to get started. Some people think that because they only have a small amount to spare, it is not worth setting aside for emergency. This is not true.
BE CONSISTENT
One of the best ways to build your emergency fund is to develop the habit of CONSISTENCY. Let’s put it this way: It’s impossible for us to lose weight after just one workout.
Here are some simple tips to develop consistency:
Prioritize it in your budget. Treat is as part of your future expense. Make it part of the priority list when you’re setting your budget.
Set aside an envelope where you can put in the money allocated for the emergency fund. Make it non-negotiable.
Auto-deduction. This is one of the best ways for you to save for an emergency fund. Have your bank deduct a certain amount of money from your savings account on a monthly basis. Have them transfer this money to another account, which will serve as their emergency fund.
CUT DOWN THEIR SPENDING BUDGET
Take a look at your spending habit. Where is their money going? To the needs section or the wants section? Teach yourself to reduce your expenses, especially your wants expenses.
Instead of buying something you only want and not need, encourage yourself to save the money. The money you choose not to spend is money that you will save.
SAVE COINS AND CHANGE
Don’t spend the coins that you have at the end of each day. Each of us in our family has separate coin jars. At the end of the day, we ask everyone to empty out their pockets into their own respective jars, and once a month, we take them to the bank so they can put their coins into their savings accounts. This can add up to a big amount much faster than you think.
CASH GIFTS
Whenever you receive bonus money, birth anniversary money, or some other windfall, don’t spend it. Put it directly in the bank. Use it for your emergency fund, and not for your shopping.
GARAGE SALE
Clear old clothes, shoes, books, etc., and set a date to sell these. This way, you can easily convert the stuff that you are no longer using into cash.
STAY-CATION
You can also use your vacation budget to set aside money. Of course, there’s nothing wrong with going on a vacation as a family, but you can choose to go for a “stay-cation” instead to be able to cut a little bit on cost.
You can enjoy some bonding time with your spouse and kids while watching a movie on digital versatile disc. This way, you can build your emergency fund without sacrificing any family time.
My only goal in this article is to create an awareness that we need to build up an emergency fund. After all, I think there is truth to the saying: “PREVENTION is better than CURE.”
THINK. REFLECT. APPLY.
Have you ever experienced an emergency before that you did not expect? What happened? How did you handle the situation? What did it cost you?
To get more financial tips, please catch my latest book, “My Ipon Diary,” now available at all bookstores or visit www.chinkeetan.com/ipon.
