How to Create an Emergency Fund?

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Date29/06/2016

It is not a secret, that it is impossible to survive without money. In addition, when we have become adults, have become independent, as well as have created our own families, the number of needs, such as home and car, only grows. Family people have to ensure a life not only for themselves, but also for their family members.

Of course, in cases of financial difficulties both banks and private creditors offer an opportunity to borrow the money, but in this way people get in loan commitments for shorter or longer period of time. As the majority of people knows, loans can make financial problems even worse, therefore, it is better to collect money by ourselves and buy everything with personal means. Of course, to avoid loan commitments, we have to collect the money and to create money savings as soon as possible, especially, if the amount of necessary money is big.

Money saving means that we have to limit our expenses, namely, we cannot spend all of our money in pay day. Money saving is a good way how to educate ourselves, as well as the way to avoid any loans, because the money which is needed for some purchase is collected by ourselves. We can purchase, for example, a car with our personal means, immediately becoming its owner.

Money savings, of course, can be spent not only for different purchases and realization of our dreams, but also for unpredicted events which can create financial damages. Money savings which are created for such situations are called emergency fund. Creating of emergency fund occurs in the same way as other savings, namely, by reducing our expenses and by increasing our income. Emergency fund saves us from unplanned expenses. When something unpredicted happens, we do not have to borrow the money – everything we have to do is to take the money from our emergency fund.

When we have decided that we want to create an emergency fund, the first step is an evaluating of our budget. It is necessary to know our income and expenses which are mandatory to pay, for example, rent and utilities. It is also impossible to live without expenses for food and other daily needs. Knowing our habits, we can calculate the amount of our expenses. When we know our expenses, it is possible to understand how much money is at our disposal and for which positions we spend too much money. By examination of our financial situation we can find the most effective way of money saving.

Process of money saving is usually long. Of course, we can severely limit our expenses, but then the time of money saving may become unpalatable and abhorrent. It is possible to create an emergency fund without sharp changing of daily life as well. One of the easiest ways to save some money is to put aside a certain amount of money which does not affect the thickness of our wallets – it can be several cents. But if we want to save a bigger amount of money, this way of money saving can drug on for long time.

We can save the money while shopping as well – we can shop in wholesale markets where we can buy products for longer period of time and thus save the money. We have to prefer products which have discounts. We have to make a list of necessary products before we go to the grocery shops, so we would not get confused by wide offer and would not buy things which we do not need. We can save the money while buying clothes too. There is no need to shop in every sale of season. Of course, in sales clothes have low prices, but it is always recommended to think – do I really need this thing? Also beauty salons are not mandatory to visit every month – maybe you have some friends who can cut your hair or make a manicure? Money which is saved in shopping and services have to be put aside, not spent on other things and services.

Majority of people has cars which need both maintenance and refuelling. If your expenses for fuel are high and you just cannot avoid regular and long passages, one option is gas equipment for car. Installation of gas equipment is quite expensive, but in time it definitely pays off. You can save money on maintenance as well – just wash and clean your car by yourself, rather than in car wash. Remember, that it is always possible to walk or ride a bike, reducing a usage of car.
You can increase your income and thus savings by investing and depositing. It is possible to invest even if you are not proficient in finances, but if you are not confident about your abilities to choose the best investments and deposits, talk to financial experts and other professionals which have more understanding than you. If you are ready to risk, you can invest your money in shares and other securities. Of course, there are possibilities to lose, but there are also possibilities to win. You can not only invest, but also create a saving account. Unfortunately, money in saving accounts have to be invested for several years to get some increment, because saving accounts usually have lower interest rates, therefore, also profit is lower. However, it is safer to keep money in saving account, rather than in piggy bank, because it is more difficult to get and thus spend.

The most important thing which is necessary for successful money saving is a target. It is more easier to save money when you know the purpose. There are three things which can help to save the money – motivation, willpower and patience. Everyone needs an emergency fund, because life is too unpredictable. We cannot know what will happen next and whether it will need financial investments. To avoid situations when you need a money, but you do not have it, create an emergency fund.