* Aim To Save Enough For 3 To 6 Months

Whether you’re starting a brand-new savings plan or have some resources already tucked away, it’s important to have a concrete goal. A good target to shoot for is to save enough emergency funds to cover all of your regular expenses for a period of three to six months. Be as complete as possible when assessing your costs. Mortgage payments/rent, utilities, food, phones — your monthly expenses can pile up quickly in an emergency! Of course, it isn’t always possible and an emergency won’t always wait until you have had time to save, in this case, there are options for short term loans for bad credit.

* Study Your Spending

This point follows naturally from the last one. To understand just how much you need to save, you need to understand how you spend money. Start by making a note of the total income you bring in in a month. Then, list all of your recurring monthly expenses.

Your list has to include the necessities, including things that might get overlooked — like child care, for instance. But include your more impulsive spending in your study, too. How much do you spend on restaurant eating, movies, and buying new clothes? Including these optional expenses in your monthly budget is an excellent way to find money that could be diverted toward your emergency fund.

* Put Your Savings Into An Interest Or Dividend-Bearing Account

Because you may need fast access to it, you need to keep your emergency cash as liquid as possible. Your emergency savings should never be used for investment! Putting it at risk loses sight of the point of the exercise: You need to have money you can rely on ready and waiting for an emergency.

If the idea of letting money sit around without growing rubs you the wrong way, study your options and find the highest-yielding savings account available to you.

Consider PenFed’s Premium Online Savings account, for example. It offers a healthy annual yield of 1.25 percent; that means your emergency funds will be constantly growing. And you can open a savings account like this with as little as $5 — that means you don’t have to put off the start of your emergency savings account.

* Build A Budget

It’s difficult or downright impossible to save money if you have no control over your spending. A structured budget puts you in control of your spending (as introduced above) and helps you zero in on expenses that could be cut in favor of bulking up your emergency fund.

Here are some useful questions to ask yourself as you review your monthly spending:

* Are you getting your money’s worth out of your television package? Could you cut it down to a more affordable one?

* Are you making a regular stop at the coffee shop? Cafe drinks can add up fast if you make them a daily indulgence.

* Do you have extra space in your budget for important but non-monthly expenses, like car maintenance?

* Be Realistic About Your Savings Goals

No two people need to have the same financial goals. If your income is just barely covering your loans and your family’s expenses, it might sound utterly impossible to build up a $10,000 emergency fund. Just bear this key secret in mind: Nobody achieves their savings goals overnight. Every savings achievement can — and should — be broken down into a sequence of smaller steps.

Add structure to the process of building up your emergency fund. Give yourself plenty of more modest steps to tackle and you’ll be making real progress before you know it.

* Prefer Cash To Credit

Overspending gets a lot easier when you rely on your credit cards for most purchases. Credit cards insulate you from your spending because your expenses aren’t “real” until that monthly statement arrives. Instead, rely on cash whenever possible. Once your spending is set by a reasonable budget, you can plan for every outing and bring only the cash you need — this reduces the odds of overspending.

* Bill Yourself For Your Savings

Once you have your finances planned out nicely, start treating your regular contribution to your emergency fund just like a bill. Building up your savings can be just as regular as paying your utility bill. Your bank can even help you automate your savings by setting up a direct deposit arrangement.