What to Use Your Emergency Fund For…
When it comes to having an emergency fund, it is important to know when it is appropriate to use it and when it isn’t. The most common misconception is that you can use your emergency fund anytime that you are experiencing financial problems; however, that is definitely not true.
In fact, you should be using your emergency fund only when you are in desperate need of financial help. This means that without the emergency fund money you could end up in serious financial problems. These are the only times that you should dip into your fund because you are actually experiencing an emergency.
Defaulting On a Loan
If you are about to default on a loan, then this is a good time to use some of the money in your emergency funds. However, only take enough to make the next payment, and stay out of default. Taking too much could seriously deplete your fund and could take along time to build up again.
Not to mention, the next time you need money from your emergency fund you won’t have it, which would be very bad. An emergency fund is supposed to be your back up plan when something goes wrong and you don’t want to use it out of convenience, or else you will always be tempted to use it.
Keeping Your Credit Score from Falling
A credit score is very important for a successful financial future. As a result, it’s important to keep your score in the good range. Even if it means dipping into your emergency fund to keep the good score, then you should go ahead with it.
Additionally, it is very easy to loose points in your credit score but even harder to get them back. Just to increase your score by 10 or 15 points could take a couple of months to a couple of years of paying off old debts.
However, only take from your emergency fund if your score is going to drop dramatically, if you are able to talk to your creditors and let them know about your situation first, try that. Some creditors are willing to work with their debtors in order to reach a favorable solution for both parties.
Making A Monthly Payment
Well as the name implies, monthly payments arrive every single month for credit cards. This can be a serious problem when you find yourself in a financial crisis. Though you might be tempted to take out a huge some of money from your emergency fund to pay off multiple months at once, try to take out as little as possible.
You want to only take out the amount necessary to pay the bill, nothing less, nothing more. Your emergency fund is not to be used as a regular spending account. Instead, you should already start planning to have another form of income by the time your next monthly payment is due.
How to Raise Money For An Emergency Fund
An emergency fund is more than just a savings account; it is your lifeline when you are in a severe financial situation. You should always be weighing all of your options before attempting to take funds away for your emergency savings.
However, there a few quick things you can do to raise money fast and have a hefty stash of cash available.
Sell Old Items
When it comes to selling old items, there is always a buyer and anyone is willing to pay at least a dollar for your item. The best items for selling will always be electronics, they are valuable and are very hard to find for a bargain price. Then go for any gently used clothes or shoes, name brands are preferred. Lastly, try some furniture or home décor, which someone will always need.
Try to sell as many items that you can, this means sell items that you genuinely don’t use, not just any items. Also if the item is broken or in bad shape, don’t sell it. Try to give those items away for donations.
You know all of that loose change in your pocket? Start collecting it in a jar or container in your home. You might think that pennies are worthless but actually a 100 of them make a dollar and 1,000 of them make $10. That’s a lot of money when you add it up.
So instead of just forgetting about your change or letting it fall in the cracks of your couch or in the washer, start gathering them. You will see that in now time you will have quite a good amount of money.
Simplify Your Expenses
The best way to simplify your expenses is to cut down on expenditures you don’t need. For instance, instead of going to the same grocery store to buy your produce, see if any other places sell the same quality items you want but for less.
In addition, you could cut down on your cable usage and see if maybe just streaming your TV channels instead of paying for both services is the best option. Cable bills run upwards of $100 a month, whereas the popular streaming services are all $10 or less month.
This doesn’t mean that you have to sacrifice quality nor quantity, but it is more about living within your means. You don’t need a 3 bedroom/2 bath house or apartment if you live alone. Instead try living in a 1 bedroom/1 bathroom, you could still live in a spacious place but for half the price.
This is especially true for a car. If you are someone who enjoys large vehicles, try to go for something more economically fuel-efficient, like an SVU or a medium sized car.
Additionally, if you are rarely home or rarely use your car, this is a perfect opportunity for you to go ahead and save money. You could be saving money instead of throwing it away on items that you don’t use.
This does not mean that you should be cheap, but more cautious of how and where you spend your money. You should be double checking your spending habits and making sure that you are spending your money wisely.
A good way to start, is by thinking twice about every item you want to purchase before you actually buy it. For example, when you go to buy a bag of chips, think about what your going to use these chips on or with and how long they are actually going to last. If you think you already have chips or might finish them all in one sitting, then they might not be the best thing to buy at that moment.
This is a lot about being efficient with your money, so that you are stretching each dollar as far as it can go.