Your One Step This Month: Learn How to Build an Emergency Fund

An emergency fund is your safety net, and it benefits you at least two times over: Not only will it help you afford those unexpected expenses, it will also protect you from relying on credit cards or taking out high-interest loans, which can compound your financial burdens.

How much should you set aside in your emergency fund? A good rule of thumb is to save three- to six-months’ worth of expenses. If you’d like to get more detailed, try using an emergency fund calculator. This one from NerdWallet is simple and easy to use, but there are many available online. Even if you have an emergency fund already, it’s a good idea to recalculate what you need at least once a year.

Once you’ve identified how much you need in your fund, the next step is to start saving money. Even if you can only set aside a little each month, every dollar you save is another dollar you won’t have to borrow in case of emergency. 

4 Tips That Will Help You Build Your Emergency Fund

Building an emergency fund takes time. Here are a few tips that will help you stick with it and save what you need.

Set a goal and review it each month

If saving for your emergency fund is part of your monthly budget, you’re more likely to succeed over time. Set your goal up front, then make it a habit to review how you’re doing each month. Look for opportunities to do better (but don’t be too hard on yourself, either).

Make it automatic

Adding to your emergency fund each month gets a lot easier when you don’t have to think about it. If your bank or credit union offers automated savings tools, use them! Even if you decide to start small, the important thing is to start.

Reduce your unnecessary expenses

While you’re building your emergency fund, one big favor you can do for yourself is to cut out unnecessary expenses. Then, once you’ve saved what you need, you can treat yourself without worry.

Replenish the fund when you use it

When the unexpected happens, and you need to tap into your emergency fund, don’t forget to fill it back up. Once the initial crisis has passed, look for ways to start saving money again to help you restore your peace of mind.

Study Up on Student Loan Debt Solutions

Empower is here to help you crush your student loan debt. Explore the resources within the “Empower Student Load Debt Solution,” and explore the benefits that may be available to you.

To learn more, log into empowermyretirement.com > click on Planning > click on My Financial Path > click on Learn More under “Empower Student Debt Solution.” 

401(k) Loans: What are they and how do they work?

In a crisis, you may consider any and all of your financial options. That could include taking out a 401(k) loan, which allows you to borrow from your retirement savings. 

Typically, plan participants are able to borrow up to 50% of their vested balance or $50,000 — whichever is less. This type of loan can be easier to qualify for, but it also comes with some risks. Before you make any decision about taking a 401(k) loan, take the time to educate yourself about the pros and cons.