You may need to really focus on building savings quickly.
- It’s a good idea to have enough savings to cover at least three months of essential bills.
- New data reveals that nearly a quarter of Americans have savings that fall short.
You never know when you might lose a job through no fault of your own. Such was the experience many workers had at the start of the pandemic, when nonessential businesses were forced to close, leaving millions of Americans scrambling to file for unemployment.
However, the downside of unemployment benefits is that they are not designed to replace your paycheck entirely. That’s why it’s important to have a decent level of cash reserves in your savings account, not just to deal with job loss, but to deal with all the different kinds of unplanned expenses that can come up, from medical bills to auto and home repairs.
As a general rule of thumb, it’s wise to have enough money saved to cover three to six months of essential bills, including rent or mortgage payments, utilities, and food. But in a recent Morning Consult report, nearly 25% of consumers said they couldn’t cover a full month’s worth of essential bills with their savings alone. If that’s the pot you’re in, here are three important moves to make.
1. Have a strict budget
Having inadequate savings leaves you vulnerable to debt. That’s why it’s important to build your savings quickly. Following a budget might make it easier.
Once you set a budget, you’ll have a better idea of where your money is going month after month. And you may find it easier to identify expenses you can cut to free up more money to put in the bank.
There are different methods you can use to budget, so feel free to play around with various options and see what works best for you. You can decide to keep a budget in a spreadsheet, or you can choose to sign up for an app that links to your bank account and credit cards.
2. Start depositing any bonus cash you get
Any extra money that comes in during the year can be an opportunity to add to your savings. That could include your tax refund, cash gifts you receive as birthday or holiday gifts, or bonuses you receive at work. If you have a credit card that gives you cash back on your purchases, that’s money you can deposit too.
3. Increase your income with a side job
Maybe you live quite frugally and don’t spend much of your paycheck on non-essentials. If so, a side hustle could be your ticket to building savings faster.
There are many different gigs you can choose from, so ask yourself these questions to get to the right one:
- How many hours a week can I reasonably commit to?
- Do I need a flexible schedule or can I commit to a pre-set schedule?
- Do I need a remote concert?
- What is my weekly or monthly income goal?
Note that you can always start with a secondary concert and move on to another if it doesn’t fit well. But going over these questions might help you choose a good option to start with.
If you don’t have enough savings to cover a full month’s worth of essential bills, do your best to build up your cash reserves as quickly as possible. It may take some time, but the sooner you build that safety net, the more protection you’ll have in case life ends up throwing you a curveball.
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