Armaan met with an accident. He was hospitalized for about two weeks and had to be on rest for an additional two weeks before he could slowly start resuming his regular life. Unfortunately, he had no accident cover in his insurance policy. Luckily though, he had kept money aside for such emergencies. But most of the emergency fund was used up and now he has a new challenge…
To Rebuild The Emergency Fund
It is not easy to start rebuilding the emergency fund but it has to be done. Here are 5 ways to replenish your emergency fund –
1) Reduce/Freeze Expenses For A While
Live everyday with a frugal mindset for some time. Cut out all unnecessary expenses. Try to avoid spending on new clothes or going to the new fancy restaurant. For example, if you are living on rent, check with your landlord and try to accommodate a roommate for some time. You can reduce your rent outgo. Reducing expenses in such a manner can lead to increased savings. The increased savings can be utilized to build the emergency fund.
2) Minimize On Other Goals For Some Time
You may be having multiple money goals. You must be working on ensuring that you achieve these goals. For example, you might be saving up for buying a new car. You might want to pay off your education loan immediately to be free of debt.
If possible, try to postpone the purchase of the new car by a couple of months. If you think you can manage to continue the loan, continue paying the loan EMI for an additional two or three months. The money that you allocate to these goals can be transferred to the emergency fund temporarily. Once the emergency fund looks in good shape, you can continue to work on the other money goals in the usual manner.
3) Track Your Budget For Spending
Go back to your budget and track it minutely. Check your income and expenses. Are there any expenses that can be cut off? You can cut back on your expenditure on new clothes or watching movies in the theatre for some time and use that money to rebuild your emergency fund.
4) Increase your cash component by selling stuff
Look around your house. If you find things that you do not use but they are in good condition, you can sell them. There are many online marketplaces – Quickr, Olx, Buy and Sell Groups in Facebook where you can put them up for sale. The money you get from these transactions can be kept aside as an emergency fund.
5) Try Out Alternative Sources of Income
Find out additional/ other sources of income apart from your day job. Take tuitions, freelancing assignments or part-time jobs. You can try to monetise your hobbies if you have any. Use the money earned to replenish your emergency fund. You might also find out that you are great at this alternate career and it can become something very lucrative.
6) Learn To Say “NO”
There are so many temptations on which we can spend our hard-earned money. Understand that it is ok to say “No”. Do you really need to colour your again? Is it really necessary to buy the latest smartphone in the market when you are sure you can manage with your existing smartphone for a few more months?
If you can say “No” to some non-essential things, you can easily build your emergency fund.
Where Do We Keep Our Emergency Fund?
It is important to keep the emergency fund in a manner that is safe and easily retrievable for making payments. But at the same time, we do not require to access the fund regularly and therefore it is not a great idea to let all of it remain in cash or in the savings bank account. It will lose value on account of inflation. Moreover too much cash in the house is also not a safe option.
The emergency fund should be kept such that –
Here are some avenues of keeping the emergency fund –
It takes effort and time to rebuild an emergency fund. But if you have done it once, you sure can do it again.
Dilzer Consultants Pvt Ltd