Learn How to Save For an Emergency Fund While in Debt

Learn How to Save For an Emergency Fund While in Debt

If you feel you can barely pay the bills, how can you save for an emergency fund? Is it even possible, with the thought of those debts robbing you of sleep at night? If you multitask with your money, you can. It just takes some good planning.

Emergency funds are great in theory, but the clamouring of other financial demands can steal their thunder. You must make this fund a long-term financial priority. Then, achieve both goals by carefully forecasting your finances.

Your first concern should be high-interest credit card debt because it deeply impacts your income. Bring the cost down with a lower interest loan. A line of credit, perhaps.

Or transfer your balance to a credit card with an introductory, no-interest rate. But first, plan an aggressive payment strategy to end that debt before the interest rate skyrockets back up.

Maybe you can only manage those monthly payments, depending on the amount of your debt. That’s fine; paying it off is a great short-term goal. Once it’s gone, you can put that cash toward your emergency fund.

If, with this strategy, you have money left over for your emergency fund goal, that’s ideal. It will depend on a careful review of your finances.

Start by calculating your fixed expenses. Examine your debit and credit receipts from the past few months and estimate your fixed expenses: housing, food, transportation, and payments on longer-term debts such as student loans. Consider how shopping the sales could reduce your food expenses.

Your monthly total is your bare-bones budget. This amount could carry you through some tough times if necessary. Three months of this is the minimum amount for your emergency fund.

The rest of your income is discretionary money. You can allocate it as you wish. Tack on a modest amount for entertainment, some low-cost fun so you won’t feel completely caged by your plan. Then use the remainder to work on your wealth.

Systematize the process by using online banking. You can automatically transfer funds on payday, so they are out of your reach and busily achieving your goals.

Address both debt and your financial security by multitasking your money. Ask your Financial Advisor to help you develop your strategy.

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