Maybe you're one of the people who went through mass layoffs in virtually all industries. Maybe you've made a goal to become more financially stable. You might even be worried that this is the year the economy will truly enter into the recession many have predicted for quite some time.
Regardless, many surveys have shown that most Americans live paycheck to paycheck and don't have a "rainy day fund" at all. In fact, one estimate puts it at roughly three out of every five people. Naturally, this can cause quite a bit of stress - especially given the general unpredictability of everything happening in the world.
Thankfully, all hope is not lost. If you want to relieve stress, the most important step is to start building your emergency fund as soon as you can - and it's a lot more straightforward of a process than you might think.
Constructing Your Emergency Fund: Breaking Things Down
The first part of constructing your emergency fund comes from the realization that you are not alone.
As stated, a significant number of people are currently living paycheck to paycheck. But that also includes nearly half of people earning six figures or more. Part of this concerns the consistent level of inflation that has been eroding wage gains for quite some time. Another major contributing factor is how real average hourly wage earnings are down approximately 3% from a year ago.
No matter the reason, it's something that many people out there focus on - particularly when it comes to their New Year's resolutions. Another recent study indicated that about 31% of people said they would increase their emergency savings. This beat out other important financial-related matters like buying a new car, saving for a home, or hosting the wedding they've always dreamed of.
To get to the point where you can start to build up that emergency savings fund, there are a few key things to keep in mind. First, you should take advantage of any opportunity to reduce your monthly bills. You should go through and cut everything you don't need. You may like having multiple streaming services, but if you only use one in particular, you can easily eliminate the others without necessarily feeling like you're losing out on anything.
But shop for the rest of your bills to see if you can find a better deal elsewhere. Likewise, you could change to a less expensive plan on subscriptions and things of that nature. This is one of those situations where a little effort goes a long way.
Likewise, you'll want to use this to reassess your credit card habits. It's no secret that prices were higher during the holiday season, and many people have been taking on larger amounts of credit card debt. In addition to cutting back on your spending, you should call your credit card companies and try to ask for a lower interest rate. The worst they can say is "no," but if they say "yes," you'll be able to pay off those cards faster and keep a lot more money in your pocket at the same time.
Another viable way to start building (or rebuilding) that emergency fund involves selling what you aren't using. We all have once important things that are now an afterthought. Maybe you haven't worn one particular outfit in over a year. Maybe you have a collection you were once passionate about but now rarely interact with. Look around your life and see if you can find those items you would be willing to part with forever. At the very least, you'll make additional money to help that emergency fund start. In the best-case scenario, you'll be able to use that money where it can generate the most value in your life - like by paying down those credit card debts sooner rather than later.
If you'd like to find out more information about how to relieve stress through an emergency fund, or if you'd like to talk to someone about your needs in more detail, please don't delay - contact us today.
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