Yahoo Finance 6 Ways the Middle Class Can Save Enough for Emergencies
Being left unprepared during an emergency is a stressful situation to find yourself in, to say the least. Your car breaking down, an unexpected medical diagnosis or a faulty fridge — are all things that will eventually happen to the best of us.
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“Having an emergency fund is so important, regardless of what class you are in,” said Carter Seuthe, CEO of Credit Summit.
The good news is, if you’re lucky enough to be a part of the middle class, in particular, you’re also more likely to have access to the finances that can go toward a rainy day fund.
Here are some expert-backed ways you can save up enough for emergencies.
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Start With a $1,000 Goal
While the end-goal is typically to have three to six months’ worth of expenses saved up for an emergency fund, Seuthe said that doesn’t have to be what yours consists of if it’s not realistic.
“For a lot of people, it’s not realistic to have that much money sitting untouched while it’s needed to pay bills and make loan payments,” he explained. “What I always recommend to people in such scenarios is to aim to get $1,000 in their emergency fund.”
He said that’s a decent baseline amount that can cover a lot of possible emergencies that may emerge, and it allows you to not have to put nearly as much aside each month for your budget.
“Once you’ve hit $1,000, contribute as you can, when you can,” he said.
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Automate Your Savings
The easiest way to save for emergencies, according to Marigny deMauriac, certified financial planner and CEO of deMAURIAC, is to automate a monthly or bimonthly dollar amount — in sync with your payroll processes — to draft automatically into a high yield savings account.
“Treat it as you would paying your cell phone or internet bill, so you never miss a payment,” she suggested. “Maybe even start with a similar dollar amount — something you can easily manage every month or every two weeks.”
She said to set a goal to increase steadily until your emergency fund is fully funded. As mentioned above, a good starting goal is to get to $1,000.
“Then, you want to shoot for replacing at least one month of your expenses,” deMauriac explained.
Afterward, she said to continue on from there until you have at least three to six months of your expenses stowed away.
“Right now, interest rates are advantageous,” she said, “so seek out a high yield savings or money market option so your funds can earn interest, rather than just sitting as cash, but also remain liquid and accessible — and not subject to stock market fluctuations.”
Do It Incrementally
Syed Lateef, business coach and CEO of SyedBNB, said that for the middle class, the simplest and most traditional approach is incorporating savings into your monthly budget.
“Allocate a fixed amount, say $100 or more, to put into a dedicated savings account for your emergency fund,” he suggested.
He noted to be sure to choose an amount that’s realistic and achievable for you. “The higher the better, of course! If saving $100 monthly seems too much, break it down to $25 weekly. Finding an extra $25 each week is doable for most. If you manage to save $100 a month, you can have $1,200 for emergencies by the end of the year.”
Take Advantage of Windfalls and Lump Sums
“Nearly every middle-class American receives an annual government check in the form of a tax refund,” Lateef explained. “In some years, like 2020 and 2021, there were extra checks in the form of stimulus payments.”
He said these were significant opportunities for many to jump-start or completely establish their emergency funds.
“Use any large sum you receive, like tax refunds, gifts, inheritances or work bonuses, to bolster your emergency fund,” he said.
He added that you’ll appreciate having this financial margin when unexpected expenses arise.
Be Frugal
“Honestly, it’s understandable that some middle-class individuals enjoy spending — been there, done that — but adopting a more frugal lifestyle can significantly expedite your journey toward financial security and preparedness for emergencies,” said Lateef.
He recommended beginning to track your income and expenses, if you haven’t already.
“You might discover areas where you’re overspending,” he said, “such as on unused subscriptions or impulsive purchases on platforms like Amazon, and redirect those funds into your rainy day fund.”
Bank Your Raises
Ann Martin, director of operations of CreditDonkey, said one strategy she recommends for building savings on a tight budget is to bank your raises.
“Your first step here is to establish a sustainable budget at your current income level,” she said. “As long as you’re paying all of your bills and keeping the lights on, that’s fine. Just stick to it, and keep working.”
She said that when you get a raise, promotion or new job, this is the time to focus on boosting your savings.
“Try to keep your budget intact as much as possible,” she explained. “New jobs can sometimes come with new expenses like longer commutes, lunches out and stricter dress codes, but don’t spend any money you don’t need to.”
Instead, she suggested you start saving it. “You’ll be much less likely to notice the loss of this money from your budget if you don’t actually have to reduce your budget. As you get more raises, keep putting them into savings as much as possible.”
Martin said that before long, you’ll have the income stream to not only build an emergency fund, but also save for long-term goals like homeownership and retirement.
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This article originally appeared on GOBankingRates.com: 6 Ways the Middle Class Can Save Enough for Emergencies
