What seemed like a reasonable goal for an emergency fund – spending three to six months’ worth of spending – no longer feels like it after Covid devastated our economy.
Financial expert Suze Orman believes people with stable jobs should seek a 12-month emergency fund after millions of people lost their savings over the past year. If you thought saving this much money sounded ridiculous, that perspective may have changed your mind.
TPH Senior Writer Nicole Dow delved into the pros and cons of having a one-year emergency fund, including who needs it and who doesn’t.
It also explains how to determine what your emergency fund should look like. Tip: It’s not 12 months of your take-home salary, but a tight budget that you and your family can sustain for four seasons.
This is how you can find out how much to invest in your emergency fund – and how you can get extra money.
1. Determine your bare bones budget
If you lose your job, how long will it take you to get a new one? It depends on your industry, but the average is around five months (and that was before the pandemic broke out). You hope it will be less, but it could be even more, so you need to be prepared.
That means you set a simple budget that you can adjust if necessary. Keep only the bare essentials and cut what you can do without. Food, shelter, medical expenses, utilities, and minimum debt payments can remain; Subscription services, additional debt payments, and extracurricular activities are paused.
You can also see if your utilities and banks can offer help or cut fees, and check with your mortgage lender about deferral options.
Once you have that budget for just the essentials, multiply it by 12. This is what your 12 month emergency fund savings goal should look like.
2. Start your emergency savings fund in a high-yield account and earn 16 times the average interest
If you don’t have an account for your emergency fund, get one. Keeping cash under the mattress or in the sock drawer isn’t very safe, and it won’t earn you any interest – not much less than your average savings account.
However, with an account with Aspiration, you can earn up to 16 times the average interest on the money in your account. And get up to 5% back every time you use the debit card.
Not too shabby!
Enter your email address here to receive a free Aspiration Spend and Save account. After you’ve verified your email, securely link your bank account so they can help you get extra money. Their money is FDIC insured and they use military grade encryption which is nerd talk for “this is perfectly safe”.
3. Cut your bills now to save for later
There are some bills that you can now bring down without sacrificing anything.
By reducing these monthly payments, you can save more money instantly and You need to worry less if you ever need to reach into your emergency fund. It’s a win-win situation.
Start with your auto insurance. When was the last time you checked car insurance prices?
You should buy your options about every six months – this could save you quite a bit of money. But let’s be honest. It probably isn’t the first thing you think about when you wake up. But it doesn’t have to be.
A website called Insure.com makes it super easy to compare car insurance prices. All you have to do is enter your zip code and age and your options will be displayed.
With Insure.com, people saved an average of $ 489 a year.
Yup. That could be $ 500 straight into your emergency fund just to take a few minutes to consider your options.
4. Get money back every time you shop for groceries
They know couponing is a guaranteed way to save more money while shopping – but it is downright time-consuming. Instead, you could simply be rewarded for buying what you are already shopping for. No clipping is required, and you can still add more money to your emergency fund every month.
A free app called Fetch Rewards rewards you with gift cards just for buying toilet paper and more than 250 other items in the grocery store.
Here’s how it works: After you’ve downloaded the app, just take a picture of your receipt showing that you’ve purchased an item from one of the brands listed on Fetch. For your efforts, you will receive gift cards for places like Amazon or Walmart.
You can download the free Fetch Rewards app here for free gift cards. Over a million people already have it, so they have to be into something …
5. Earn up to $ 225 on your emergency fund just for walking down a rabbit hole with your phone
We’ve all been through this. You sit down at the end of the day to relax on your phone and suddenly it’s two hours later and you’re back on the weird part of YouTube. How did I get here in the first place?
But you don’t have to feel guilty about it anymore. Research companies will actually pay you to search these video rabbit holes.
You can top up up to $ 225 per month by signing up for a free account with InboxDollars. They present you with short video clips every day to choose from and then ask you a few questions about them.
All you have to do is answer honestly and InboxDollars will continue to pay you every month. That may sound too good to be true, but it has already paid more than $ 60 million to its users.
It takes about a minute to sign up and get paid for your nightly zone-out.
6. Find out if you are paying too much
Think of all the times you paid too much … and how much money you could have saved in your emergency fund if someone had just told you before you stole.
This is exactly what this free service does.
Just add it to your browser for free, and before you check out, it will check other sites including Walmart, eBay, and others to see if your item is on sale for a cheaper price. You can also get coupon codes, set up price drop notifications, and even see the item’s price history.
For example, let’s say you buy a new TV and assume you’ve found the best price. Here you will receive a pop-up in which you will know whether this particular television is available for a cheaper price elsewhere. If coupon codes are available, they will also be automatically applied to your order.
Last year, this saved people $ 160 million.
You can get started with just a few clicks to see if you are overpaying online.
Capital One Shopping will compensate us if you receive the extension using the links provided.
7. Stop paying your credit card company
Your credit card company is putting insane interest rates on you – some as high as 36% – and you’re paying extra money every month that could go into your emergency savings bank instead.
But a website called AmOne wants to help.
If you owe your credit card company $ 50,000 or less, AmOne will provide you with a low-interest loan that you can use to pay off every single one of your balances.
The advantage? You have to pay an invoice every month. And since personal loans have lower interest rates (AmOne rates start at 3.49% APR), you become debt free The much faster. Plus: No credit card payment this month.
You don’t need perfect credit to get a loan – and comparing your options won’t affect your score. Plus, AmOne keeps your information confidential and secure, which is why after 20 years in business it probably still has an A + rating with the Better Business Bureau.
It takes less than a minute and only 10 questions to see which loans you qualify for – you don’t even have to enter your Social Security number. You need to give AmOne a real phone number to qualify, but don’t worry – they won’t spam you with phone calls.