Financial worries can be one of the biggest stressors for service members and their families. One practical way to alleviate those worries is to build an emergency fund.
For service members and their families, building and maintaining an emergency fund is a key element of financial readiness. It allows you to focus on the mission, knowing that you and your family can handle life's unexpected events. If an appliance breaks, your car needs repairs or you or your spouse becomes unemployed your emergency fund will provide peace of mind.
Set a goal
Though having three to six months of living expenses in your emergency fund is a good general recommendation, make your initial goal smaller. Your first milestone should be a helpful amount but one that is attainable fairly quickly. Aim for $500 to $1000 dollars to begin with; this can make a considerable difference in an emergency.
Make a plan
To reach your goal, you need to map out a plan. Set weekly savings goals. Putting away just $25 per week will get you to $500 in about four months. Don't set your weekly savings amounts too high, or you may become frustrated with the limitations. Your saving plan should challenge you, but keep it to a reasonable amount. Consider saving automatically. Setting up a payroll deduction directly to your savings account makes it automatic and requires no effort or reminders on your part.
Once you meet your initial goal, set further goals for the long-term. Perhaps you want to save one month's living expenses. When you reach this goal, strive to save for two or three months more. Remember to adjust your saving habits as you meet each milestone.
Finding money to save in your budget
Building an emergency fund can be challenging when your budget is already tight. You may be wondering where you're even going to find $25 per week to save. Start by visiting your installation Personal Financial Management Program or call Military OneSource (800-342-9647) for financial counseling, education on money-related topics and assistance with budgeting and saving. A financial counselor can confidentially review your situation and make appropriate recommendations and help you take advantage of Department of Defense resources to tap into.
In addition to financial counseling, there are things you can do at home to carve out money to set aside. Here are some ideas for trimming your expenses and boosting your savings account:
- Reduce your interest rate. Contact your credit card company and ask that they reduce your interest rate. Let them know that you may be looking to transfer your debt if they can't accommodate you.
- Shop insurance rates. Compare prices on auto and home owners insurance premiums. Or, if you are currently using two separate companies, look into placing your policies with one company to save.
- Take control of your grocery bill. Make a weekly meal plan and grocery list before heading to the store. Study the ads and coupons to see which items you may be able to save on. Don't deviate from your list.
- Cut some splurges. If you've been dining out twice a week, going to the movies regularly or stopping by your favorite coffee shop daily, try cutting some of that out. Dine out once a week, rent more movies at home or buy discounted movie tickets through Morale, Welfare and Recreation, and make your coffee in your own kitchen. Small adjustments can really add up.
- Trim your bills. Do you really need 200 cable channels? Perhaps there is a less expensive package you could switch to. If you have a gym membership, are you using it? Examine your bills and memberships to determine what you can do without.
- Save your refund. Instead of spending your tax refund this year, consider putting some or all of it into your emergency fund for an immediate savings boost.
- Turn items into cash. Take inventory of your belongings and see what you could get rid of. Using online auction sites or holding annual garage sales can be quick and easy ways to generate cash for your fund.
- Collect change. Remember the old piggy bank? It may be time to revisit that method of saving. Empty your pockets into a jar daily and don't spend any change. It's likely that you won't miss your change, and the savings can add up quickly. Cash it in monthly to add to your emergency fund. You could apply the same concept to dollar bills for faster savings.
Use your fund
Once you establish your emergency fund it becomes a security net. Some people have difficulty using it. Remember what it's there for and do not pull out credit cards for future emergencies. Find comfort in knowing that you can cover life's curveballs without going into debt.
For more information about saving and managing your money, visit the Military OneSource Money Management page or visit your installation Personal Financial Management Program.