During the month of May, household income levels increased 0.4 percent across the country from the previous year, according to a report from Harris Private Bank. At the same time, the average savings rate improved to 4.4 percent.
Meanwhile, the report also revealed that consumers are taking on less debt than they did a year ago, and getting better about paying down the debt they currently have.
While it’s great that Americans are taking control of their financial lives, this is having an adverse effect on the economy, the report said. When households all decide to save money at the same time, demand for goods and services can decline dramatically, which could impact the unemployment rate in the future.
Should this occur, and your employment status is affected, it’s important to have an emergency cash fund prepared for this event. Most experts recommend saving at least six months worth of living expenses to relieve pressure, according to Fox Business. Depending on your lifestyle, this amount can range significantly.
Use Budgeting To Start An Emergency Cash Fund?
To save an appropriate emergency cash fund, you need to make a realistic assessment of your life and finances. Remember, a middle-aged person with four children, two cars and mortgage will need much more money than a single 20-year-old with only student loans.
Take a few months to get a feel for your financial lifestyle. Try to account for every dollar you spend, ranging from rent and gasoline to food and debt payments. Be very specific. Even if you purchase a cup of coffee, you need to account for it.
Once you outline these expenses, you can sort them between necessities and luxuries. The total amount you spend on necessities will be your gauge for how much you need to create an emergency fund that will cover a six-month budget.
How To Save
To quickly save money for your emergency cash fund, try to cut out luxury expenses as much as you can, but don’t get carried away. Everybody deserves a little fun, just try not to go overboard, as you could eliminate any progress you make.
Where To Save
While some people might think an emergency fund belongs under their mattress, you should actually opt for a place that allows the money to mature and grow over time. Do a little homework on different high-yield savings accounts at brick-and-mortar banks, credit unions and online banks, advises NewsCore.
Even if you store all this money, and never need it for an emergency, having these savings can vastly improve your overall financial well-being.