Can You Build an Emergency Fund when Cash Isn’t Flexible?
It is hard to build an emergency fund when money is low. Debt, personal care, and the cost of living are always increasing, and this makes it much harder. Because of this, many people live paycheck to paycheck on a fixed income, making it ever more challenging. But can you still save when you are feeling the pressure of life’s expenses? The short answer is yes, you can. But from micro-automation to adjusting social spending, it takes some effort on your part.
Sell a Settlement with Factoring
It is sometimes hard to stretch every dollar when money is fixed. Living paycheck to paycheck is pretty common, and most people have to do this, but with good budgeting and money management, it gets much easier. Of course, immediate access to large sums isn’t always possible, but you can sell all or a portion of structured income, such as a settlement. However, it is a good idea to learn how selling future payments works before making an impactful decision.
Build an Emergency Fund with Micro-Automation
A report by Bankrate found that around 47% of Americans have enough in an emergency fund to cover a $1,000 expense. But as you know, that’s not a lot these days, and it is recommended that you have at least 6 months’ worth of living expenses saved, and automation can help:
- A standing order of $10 per week into a savings account adds up to $520 per year.
- Increase the amount based on what you can afford to automate more savings.
- Make sure your savings account is one you don’t see to reduce the chance of access.
Use Digital Round-Up Apps
We are quickly heading towards a completely cashless society today, and that means many people don’t have those handy change jars that add up to quite a bit over time. But you can still make use of the fractional amounts from dollars spent at the store, just in a digital way. Apps such as Acorns, Chime, and Qapital are excellent for rounding up your payments to the nearest dollar and saving them automatically, and some will even invest the money for you.
Challenge Yourself to Cut Spending
This is one of the more obvious, but also among the hardest to do. Cutting spending will almost always result in immediate savings that can be used for an emergency fund. However, it is challenging to change what you buy, how you shop, and even let some things go. But think about something like a streaming subscription to a channel like HBO Max. Do you even watch it? Apply this to everything else, and there are always things you can remove from your life.
Build an Emergency Fund with Bonus Money
A UK survey found that the average workplace bonus (for people who get them) is around £2,242 per year. On top of other income, such as tax refunds, rebates, and even birthday cash, you can come into substantial cash over the course of a year. Putting this extra money away into an emergency fund should be one of the biggest money management practices you try.
Don’t think of extra cash as disposable
It is very tempting to think of a windfall as disposable income. But is it really? The money can be better put to use as part of an overall savings plan that can be used in case of an emergency.
Move the money immediately
It is much easier to save money when you move it immediately into a savings account. The longer you hold it, the easier and more tempting it becomes to spend the extra income.
Consider interest savings accounts
Cash under your bed or in a general account doesn’t work for you, and actually loses value. ISAs and other savings accounts accrue interest that can at least offset rising inflation.
Bonus money is nice to have, but it is too easy to blow it on things you actually don’t need. You can do yourself and your family a service by moving it into interest savings accounts to offset inflation, and increase, which will come in handy when there is an actual cash emergency.
Periodically Sell Unwanted Items
It’s often shocking just how much stuff you can accumulate over a single season. Winter is a perfect example, where most people buy too much for the Holidays, or you might even have received gifts you can’t use. Today, you can sell just about anything on eBay, and there is always someone looking for specific items. Seasonal sales of unwanted items can provide a little boost of income that you can add to the emergency fund. As they say, every little helps!
Check for Government Schemes
It’s pretty rare we get something from the government, but there are savings schemes that will benefit you in many countries. For example, the UK has the “Help to Save” scheme for low-income workers that gives a 50% boost annually to savings. If you are looking for something similar, it is worth checking local and national government websites for these kinds of schemes that can provide a significant boost to your annual savings goals and your emergency fund.
Adjust Social Spending to Build an Emergency Fund
There can be a lot of pressure to spend money you don’t have or could use in a better way. One of the strongest sources of this pressure is social life. For example, a day out with friends can end up being pretty expensive, but it can help to adjust how you spend at social occasions:
- Let friends and family know that you are actively saving so they don’t pressure you.
- Wherever possible, suggest lower-cost or free alternatives to expensive experiences.
- Try to resist the peer pressure to spend money on completely unnecessary luxuries.
Try the 52 Week Challenge
If you enjoy a good challenge, the 52-week challenge is a great one to try for personal funds. It is pretty simple but adds up to a lot of money by the end of the year without applying too much savings pressure. All you do is begin by putting away $1 at week 1, $2 week two, and so on. The amounts are nominal and low-pressure, and get you into the habit of saving. At the end of the challenge, if you stick to it, you will have saved an impressive $1,378 for your fund.
Summary
Using factoring services to sell a settlement will help you build an emergency fund when income is fixed. However, you can also put away any bonus cash you receive, and the 52-week challenge results in a substantial amount by the end of the year if you stick to it. So, yes, you can build a fund with a fixed income by using one or more of these low-pressure methods.