Learning how to build an emergency fund when finances are tight may seem like a challenge especially when you have bad credit. Here are 9 ways to get started.
Are you looking for ways to start building an emergency fund when you have bad credit? A FICO credit score of 300 to 579 is a poor one, but that doesn’t mean you can’t turnaround your financial picture!
Saving an emergency fund of at least three to six months of your expenses is a great way to stay financially secure in uncertain times. Read on to learn nine ways to build an emergency fund now!
1. Reassess Your Budget
One of the tricks to build an emergency fund is to reassess your monthly budget. The best way to begin this process is to create a list of all your income each month, along with all of your bills.
Writing out this information will help give you a clear picture of where your money is going each month. On the ‘bills’ side of the page, determine monthly expenses that are must-have’s and extra’s.
Are there any unnecessary expenses that you can do away with? Look for subscriptions to magazines, streaming services, or other things you don’t really need.
Don’t let a bad credit score stop you from finding ways to save money!
2. Start a Side Hustle
Building an emergency fund with bad credit can be accomplished by starting a side hustle. Did you know that 43 percent of full-time workers in the United States have a side job? This extra work can help you save money for an emergency fund, pay off debt, and more!
Do you have an interest or special talent that you can monetize in some way? For example, you may work full-time for a bank but also be a talented writer. Look for freelance opportunities that pay you for your work.
This extra money you earn in your side hustle can be put into a separate account you use to build up your emergency fund!
3. Setup Automatic Deposits to Savings
A great way to build an emergency fund without a lot of effort is by setting up automatic deposits to your savings account. This makes your deposits a lot like having automatic bill-pay like you would for a car payment or electric bill.
For example, when you prepare your budget, how much money is leftover at the end of each month? What percent of that money do you need to live and what can you save?
When you decide on the amount you can save, send that money to your savings account automatically each month. This will allow you to establish your emergency fund without doing a lot of extra legwork.
4. Pay Off Credit Card Debt
Consumer debt like a large credit card balance can be crushing to you financially. The average American has $6,194 in credit card debt! With high-interest rates and other service charges, carrying a balance on your credit card can keep you in debt for a long period.
Look for ways that you can begin chipping away at any balances on your credit cards. This will help you dig out of your financial hole and improve your credit score.
It may be beneficial to also consider using a certain amount of money each month for credit card debt and sending the rest to an account for your emergency fund.
5. Save Raises
It’s nice to earn a raise at work but that doesn’t mean that you have to spend it! Saving your raises is an effective way for you to build an emergency fund while not necessarily changing your lifestyle.
For example, if your take-home pay increases 10 percent from $3,500 each month to $3,850, what will you do with the extra $350? Instead of increasing your expenses by that amount, consider sending that $350 straight to savings.
At the end of each year, you’d have $4,200 in your emergency fund account!
6. Clip Coupons or Save Email Offers
Saving coupons and email incentives are a fun way to keep money in your pocket and put it towards an emergency fund. Do you receive a copy of the newspaper each day? If not, going online can be a great way to go green while saving on your expenses.
What are some of the products that you buy each month? While many of these products may not go on sale at the store, there may be special savings coupons available online or by signing up for an email list.
The money that you save can be sent right to a separate account that you don’t touch unless there’s an emergency.
7. Sell Your Stuff
Selling the things you don’t need or use is a great way to turn your junk into money to start an emergency fund. One of the best ways to prepare for this is by cleaning out each room in your home.
As you go through these items, do you use them regularly or expect to use them in the next few months? If the answer is ‘no’ to both of those questions, it may be time to have a yard sale or post it for sale online.
Besides helping to keep your home free of extra clutter, you will turn your useless items into cash!
8. Find Ways to Lower Your Bills
When you prepare your list of monthly bills, you may find there are certain bills that you can’t live without. Based on where you live, you may not have a lot of control over the company that provides electricity and water.
That’s not the case for a lot of other bills. If you have service through certain companies for things like car insurance, internet, and cable, have you looked at the price charged by their competitors?
Spending time to look at the price of competition can present great opportunities to cut back on your monthly bills!
9. Bike or Walk More Often
Driving a vehicle is a convenient way to travel but that doesn’t mean you always need to use it. Biking or walking instead of driving to places near your home or office is a good way to exercise while also spending less money.
Instead of using gas and putting mileage on your vehicle, you can get some fresh air and walk to a store or restaurant. When you cut down your transportation costs, you can put this money into your emergency fund!
Start to Build an Emergency Fund Today
You can build an emergency fund whether your credit is good or bad! By taking time to review your personal financial situation, you can find ways to cut down on your expenses and begin to save money.
While you may not feel like you earn enough in your current situation, the chances are that by taking charge of your finances, you can make your money stretch further than you think!
Check out our blog section for a post on how to build good credit with a personal loan!