A few weeks ago I posted on my Facebook page how my husband and I have been able to save a $1,000 in 5 months. From that post I’ve received a lot of questions and comments, both negative and positive. So I thought that I would explain in greater detail the, in my opinion, easy way to build up your emergency fund.
My husband and I bank at Wells Fargo for everything from our checking, our slush fund, our budget accounts, and our mortgage. However, for our emergency fund we use Capital One 360 * {formally ING Direct}. The reason we don’t have our emergency fund at our normal bank is to keep us accountable. In other words, it has to be a true dire emergency for us to tap into our emergency fund. We keep our slush fund for any ‘oops’ moments made in our budget and our emergency fund stays reserved for major catastrophes.
At the very beginning of this year, we set up our savings account and designated 5% of my husband’s paycheck to be allocated to this account every month. We set up the account with $100 and contribute to it every month automatically. This has really been the easiest way we have found to save money. It’s ‘out of sight, out of mind’ so we don’t feel the need to spend it. Also, since it automatically comes out of our account, we treat it as we would a utility bill. It gets added into the budget every month and we deduct it from our checkbook register every paycheck. So it’s gone before we even have a chance to think about how we want to spend it.
Many people have commented that they could never save enough money to build an emergency fund because their income is too little. Here’s thought for you:
According to the National Poverty Level for a family of four the income level is: $23,550 a year. If you designated 5% of that income to a savings account every week you would save in a year: $1,144. How did I get those numbers? Here’s the equation:
$23,550/52 weeks in a year = $452 {I rounded down}
$452 a week * .05 = $22 a week to savings account
$22 a week * 52 weeks in a year = $1,144
I truly believe that if you want to save money, you will, if not you’ll find an excuse not to. I’m not saying that saving money is ever really easy but when you make it a habit it tends to become easier over time. All you need is 5% to help get you started and if 5% seems too high for you then just do 2%. Save something, anything. Even $100 in savings is better than nothing.
Linked Up To: A Bowl Full of Lemons, Thrifty Thursday
We also put any “left over” $ from the previous check into our savings account when we get the next pay check! Sometimes it is $30 other times its over $200 extra….
Out-of-sight works for me too, but you also need to make the conscious effort to live within your means following that: it only works if you stick to spending the rest of your “available” money, not if you then rack up debt on a credit card. I know you know that of course, but some people just can’t help themselves…
I love out-of-sight! 🙂 So true, it doesn’t help if you rack up debt!
We us auto-deduct as well. I don’t ever feel comfortable having extra money in checking after paying all bills and taking out grocery money, so I connected checking and savings to make it easy to transfer when we have extra left over. Both ways work for us.
I get your theory behind your math when u take that small portion of income. But that $23000 national poverty, isn’t that BEFORE taxes? Average taxes are between 26-28% … you take that out, you have a family of 4 trying to live on 325 a week/at 1300 a month. Most at this income level probably rent, average rent is 500 to 600 a month, that’s almost 1/2 income before utlities, gas, food at least for their children… now granted these families will get help…and it’s good intentions to hope they can save but I doubt it can happen. I could see someone at that level trying to save their change.
Cay, I actually know people (my mother was one of them with two kids to support) who have managed to save. It is possible but not without hustle. It will still take hustle, that is point behind saving – it doesn’t matter how much money you make or don’t make if you don’t know how to hustle savings. Even $0.25 saved is better than nothing saved.
Cay, a few years ago I was still raising children (5 of them) on an average income of 20,000 -25,000 a year. I did not use food stamps or other government help except for the free lunches and breakfasts at school but my four boys insisted the breakfasts were too small and also ate breakfast at school. Also because of being so far below the poverty level, I was able to go exempt for many years on taxes and only filed to get my earned income payment each year. I would save that each year and that was what I used each year to buy clothes and shoes and dentist bills and casts for broken arms. Yes the savings were often used as soon as they accrued but we still believed in having it put aside. It can be done, especially if the only other option is losing your home or the kids going without. It wasn’t easy or fun but it can be done.
July 23, I had 67.87 in two savings accounts and my checking account had less than ten dollars in it but was not overdrawn. My end of month for October will be just over $1000.00 my first emergency fund! It is divided into ally savings $356.56, bank savings $507.17 and checking $200.00 which I’m keeping as a buffer I also have about $70 in cash that was part of my October budget that wasn’t spent and will be added to the savings.
Once I got serious about living within or below my means it became easier and easier to keep the money in my hands and not put it into other people’s hands. While I was building my emergency fund I also began to truly tithe 10% or more of my income along side the savings effort.
Just in case some feel that maybe I just decided to put “extra” money in my savings. My take home income is on average 1550.00 a month for a single person. So my efforts were a sacrifice and are small but I’m proud of the effort and very happy with the success so far.