When you\u2019re just starting out, breaking even every month can feel like a herculean task. With rents on the rise, unrelenting grocery prices and multiple non-negotiable bills each month, finding extra money is a challenge, to say the least. But there\u2019s probably more wiggle room in your budget than you\u2019d expect: And that extra change can help you do something essential for your long-term financial health. <\/p>\n\n\n\n
You\u2019ve probably heard of an \u201cemergency fund,\u201d but haven\u2019t prioritized building one. In this guide, we\u2019ll explain why establishing a financial safety net is essential to your long-term financial health \u2014 and show you how to get started.<\/p>\n\n\n\n
The tl;dr of everything we\u2019re touching on in this guide is simply: \u201cLife happens, be prepared.\u201d Should you lose your job<\/a>, need to leave work to care for a sick loved one, get into an accident or fall victim to a crime like identity theft, a financial safety net could be the difference between a temporary inconvenience and falling into long-term debt. <\/p>\n\n\n\n And the best financial safety net is the one that adapts as your life changes. So while your expenses may be barebones now, they won\u2019t always be<\/a>: So founding a bedrock backup fund that can grow with<\/em> you is a good start to future-proofing your finances. <\/p>\n\n\n\n Starting from scratch? Perfect. Follow these five steps, and you\u2019ll be better prepared if and when trouble comes your way. <\/p>\n\n\n\n This is the minimum amount of money you need to cover your basic expenses each month. To find this number, add your housing costs, typical monthly grocery bill, utilities and minimum payments on any debts you owe. If these numbers fluctuate during the course of a year, estimate an average and go from there. <\/p>\n\n\n\n It\u2019s easier to make progress if you set achievable goals. Here\u2019s how we suggest setting up your savings targets:<\/p>\n\n\n\n This is arguably the hardest part of the process: Be realistic about what you spend. Look back at last month\u2019s spending, and add up the total you spent on non-negotiables. <\/p>\n\n\n\n For example: Let\u2019s say that your monthly must-pay expenses are $900 in rent, $300 for groceries, $100 for utilities, $350 to cover your student loan payment and $50 to make your minimum credit card payment. All together, your minimum expenses for a month are $1,700. This is your first savings target. <\/strong><\/p>\n\n\n\n If you\u2019re on razor-thin margins as it is, finding extra cash to put towards a safety net can be difficult. But now that you\u2019ve reviewed your spending, you might have found a few things that you spend more money on than you\u2019d think. <\/p>\n\n\n\n So instead of working more, use the opportunities you identified to cut back, then pay yourself the difference. Even if you cancel a streaming subscription or eat out a few fewer times per month, the savings can add up surprisingly quickly. Just don\u2019t go overboard<\/a> on slashing your spending: Life is hard, and getting takeout once in a while makes it more bearable.\u00a0\u00a0<\/p>\n\n\n\n Compounding interest isn\u2019t magic, but it certainly feels that way. Instead of parking your money in your checking account or an envelope (which is actually a great way to budget<\/a>), open a high-yield savings account. As you work and grow your safety net, you\u2019ll get extra returns just for keeping it in the right place. When you\u2019re earning interest in your sleep, it becomes easier to achieve your goals. <\/p>\n\n\n\n If your job offers a 401(k) matching plan, profit sharing or any other financial benefits, take advantage of them. If you\u2019re not already, you could be missing out on investments that can multiply in value<\/a> as years pass.\u00a0<\/p>\n\n\n\n There are also common benefits that can save you money on essentials, too. From pre-tax transit options, incentives for riding a bike or carpooling, employee discount programs and health insurance plans like FSAs, a little research on your part could unlock a lot of flexibility in your finances. <\/p>\n\n\n\n Accredited Debt Relief might be able to help. If you have unsecured debts from credit cards, personal loans or medical bills, our debt consolidation program may be the ticket to making your monthly payments more affordable (and getting you out of debt in as little as 24-48 months). <\/p>\n\n\n\nHow to Build a Financial Safety Net From Nothing<\/h2>\n\n\n\n
Step 1: Know Your Minimum Living Expenses<\/h4>\n\n\n\n
Step 2: Set Your Savings Intentions<\/h4>\n\n\n\n
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Step 3: Calculate Your Monthly Minimum Expenses<\/h4>\n\n\n\n
Step 4: Redirect Non-Essential Spending<\/h4>\n\n\n\n
Step 5: Make Your Money Work Harder<\/h4>\n\n\n\n
Don\u2019t Miss Out on Free Money<\/h2>\n\n\n\n
Big Bills Bumming You Out?<\/h2>\n\n\n\n
See Your Options:<\/h3>\n\n\n