4 Effective Tips to Secure Your Emergency Fund

25-year-old Vanessa realized the importance of having an Emergency Fund when she was fired at work. None of her closetful of designer clothes and bags would be able to sustain her monthly expenses except at least a 6-months’ worth of savings until she gets a new job. Thankfully, she had set aside some of her money every payday.

If you have made a decision like Vanessa, here are a few tips on how to build your Emergency Fund:

1. Track Your Monthly Expenses

Make it a habit to record your regular expenses –food, utilities, housing costs, transportation costs, insurance, mortgage and all of your other “must-pay” bills. You can use LiveOlive’s Budget Calculator to help you break down your expenses. There are many mobile apps that can also help you to track it on monthly basis. Within three months you will know the ballpark figure of what you need to set aside in a separate savings account.

2. Cut Your Spending

Take Vanessa’s case: her monthly income is Rp 7 million, while her monthly expenditure is Rp 4 million. Although she regularly saved Rp 1.4 million –20% of her income—each month, she knew that she would have to “wait” for 17 months to secure her Emergency Fund (Rp 4 million x 6 = Rp 24 million). That’s one and a half year!

If you don’t want to wait that long, you can cut your budget for shopping and hanging out by doing these:

● Instead of stopping at Starbucks every morning, get your regular brew from a local coffee shop

● Take the cash you need for a whole week and then leave your debit and credit cards at home

● Buy your fruits, vegetables and meat products from the wet market or street vendors. The quality is the same like those sold in the supermarkets, but you can save half the price.

3. Get Other Sources of Income

Start looking around for an opportunity to do a freelance job besides your nine-to-five day job. It’s only going to be temporary and you can choose to do the things you like, for example, selling some crafty accessories that you create, or designing a wedding invitation for your friends.

4. Sell Unused Items    

A cocktail dress that’s too small for your current size, a bulky old TV that’s taken up too much space, a baby stroller that your kids no longer need; there are some items around your house that just sit there and collect dust. Collect all your unnecessary stuff and sell them through online sites like KaskusTokobagus, or join some Garage Sale events such as those arranged by Jakarta Garage Sale. After earning this money, you need to add it to your savings account, or the effort made will have been wasted.

Those are just some ideas to get you started, with one rule of thumb: whenever you get a big chunk of cash (salary bonus, freelance jobs, cash gifts), put it straight away into your Emergency Fund before you are tempted to spend it.

Read also: Your 15-Day Money Diet Challenge

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