One of the concerns that accompany living in a country where basic human needs like healthcare and electricity take up a significant part of your income, especially at a time like this, is running out of funds.
We all, to a certain degree, need some sort of safety net and an emergency fund is a great place to start.
What is an emergency fund?
An emergency fund (or savings) is money put aside to cover large, unforeseen circumstances and expenses, such as medical emergencies, home repairs, and unforeseen unemployment.
Why you need an emergency fund
Emergency funds create a financial safety-net that can keep you afloat, without the need to rely on high-interest loans or borrowing large sums sporadically during a financial dry-spell. It can be especially important to have an emergency fund if you already have debt, because it can help you avoid borrowing more.
To get you started, we have curated a list to help you simplify emergency funds and how they work.
How to begin building you emergency fund
1. Split the burden
It can be difficult to create an emergency fund by yourself. Another way to ensure that you (and your closest friends) have an emergency fund saved up is to create one together.
You can review each of your daily spending and lifestyle costs so that, collectively, you have enough to start a substantial emergency fund.
2. Set mini saving goals
Financial experts say your emergency fund should have at least 2 to 6 months' worth of your living expenses.
But this can be overwhelming, so it is advisable to start small. Experts say tracking your payments is a great way to start your budgeting practice— monitor what you’re spending where and where you can comfortably cut costs.
3. Efficient Budgeting
A major challenge in budgeting is the mindless, seemingly insignificant spending. I can't be the only one who doesn't think twice before buying a few too many plantain chips in traffic, or stops by the kiosk to buy a little something, just because I'm bored. And then we wonder where the cash in our wallet has gone.
To create an achievable savings plan, you're going to need to monitoring your spending and determine where you're doing too much. You'd need to monitor your spending—either with a money diary or with a tracking tool—at least for a month, identify where you have been a little too generous and adjust accordingly.
Use gomoney's transactions tracker to keep track of your spending, identify your overboard spots and make the necessary adjustments. When you allocate your transactions to the different categories, you can review where you're spending more than necessary and shave off without compromising your comfort.
4. If you have the time, consider multiple sources of income
Beefing up your skills is important because one thing that will never go out of rotation is the need for human capital.
5. Pay your debts 🌚
While you're prepping your emergency funds, don't forget to account for what you owe. It's important to avoid ever going further into debit— that's the first step to getting out of it.
If you don't absolutely have to pay your debts right away, you can contact your creditors and agree on a convenient payment plan that doesn't affect your budgeting. Remember, your saving is the most important factor here so try to spread your pay-back plan as thin as your creditors will allow.
Everyone, regardless of their financial capacity, could benefit from a safety net. It can be overwhelming to start, but once you find your rhythm, we promise you that the benefits outweigh the cost! With the savings and tools to crafted help you pay bills and control your money effortlessly available to you, you're off to a good start!