BUILDING SAVINGS...

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When Money Is Tight

Building an emergency fund is essential for cushioning yourself against unexpected financial expenses, but it is not always easy to find money to put aside for this. If you do not have much money left over at the end of the month, you might be wondering how you can build your savings to any great degree. Fortunately, you can still build up an emergency fund when money is tight, but you may need to lower your goals and expectations as a result.

Start small

If money is tight, you need to have a small savings amount in mind to begin with. If you can only spare $20 per month, stick to this amount and aim to improve on it if you find yourself with more surplus cash in a given month. If you currently have no savings, it can seem like a daunting challenge to build up an emergency savings fund of at least $1,000, but it is often surprising how quickly your balance can grow once you have started your savings journey. Putting away $20 per month may sound like an insignificant amount, but it is very likely that it will otherwise be spent on items that are not strictly essential. Transferring it to your savings takes away the temptation to spend surplus cash, as well as helping you to build up your emergency savings fund.

If you know that you can definitely set aside $20 per month, you may want to set up a direct debit so that this amount is automatically debited from your bank account and transferred to a savings account. This removes the possibility that you may forget to transfer the money and ensures that there is always something going into your emergency fund. If you have anything extra left over at the end of the month, you can manually transfer this to a savings account to further increase your emergency fund.

Increase your earnings

If your current salary does not stretch much beyond your outgoings, try increasing your total income through other means. This can involve taking on part-time work or doing income-boosting activities such as completely paid surveys, taking part in mystery shopping or selling unwanted and unneeded possessions on eBay or Amazon. Anything you earn from boosting your income should be classed as "extra" income and added to your emergency fund.

Give up treats

Most people have at least one 'treat' or 'luxury' that is eating into their budget. Giving up this 'luxury' would save some money that could be added to your emergency fund. This may seem like a big sacrifice, but it is a good move if you are serious about building up your emergency fund.

Bank your loose change

Collecting your spare change in a tin or jar can be a good way to find a little extra for your emergency fund. The contents of this can then be banked on a regular or semi-regular basis. Saving your spare change can often build up more than you might think and it is not impossible to add an extra $200 or more to your emergency fund over the course of a typical year using this trick.

Do not dip into your savings

Your emergency fund should be reserved purely for unexpected expenses or situations that would otherwise put you at risk of falling into debt. Examples of this include a broken boiler leaving you without hot water or a redundancy leaving you without income. In both of these situations, having an emergency fund would avoid the need to rack up an overdraft or use credit cards to get by. However tempting it may be, you should avoid withdrawing money from your emergency fund unless it really is a genuine emergency.

Paying off debts or building your emergency fund?

If you are currently paying off debts, you may be wondering if it is better to continue doing so or work on building your emergency fund. If you do not have an emergency fund in place, you may want to prioritize this by only paying the minimum payments on your debts until you have reached your target. After this, you can refocus on repaying your debts .

By SallyA