How to build an emergency fund?
An emergency fund, as you know, is money you can use for big emergencies such as losing a job, an
important, but unexpected, home repair for which you do not have money, such as a furnace or essential home appliances (washing machine, dryer, oven, dishwasher) failure etc.
You should not use the emergency fund for anything that is not an emergency, that cannot be paid any other way. If you can charge it to your credit card is better to charge it to collect airline miles, emergency fund is only for real emergencies. Remember that if your Bose sound system fails, it is not an emergency. An emergency fund can be from 3 to 8 months of your living expenses.
How to save in difficult times?
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Think of it as a temporary sacrifice. Just like cramming before the exam, it will be temporary so you can make sacrifices for a short period of time.
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Get a part time job. This may not always be possible, but more income is always the best way. It can be as simple as helping a friend or neighbor mow the lawn or painting the house. As long as it brings any money you should do it.
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Do a bare bones budget. Write down all the absolute necessities to live. Imagine a scenario where you and your spouse do not have any money coming in, what expenses will you eliminate? Cable, TiVo, etc. This is only an exercise, so be radical. Then really analyze what can you live without for a few months. Cell phones plans, cable plans, navigation systems etc. Remember people used to live without all theses things. Anyone can do it, it is only for short term. You need your bare bones budget anyway to determine the size of your emergency fund. Determine how aggressive you want to be saving monthly and create a budget accordingly.
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Sell unnecessary things on Craigslist, Amazon or EBay. You will be surprised what you are able to sell. Things that I thought were garbage (like very old electronics and used books) can sometimes be sold for a price higher than you can ever imagine.
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If you do handicrafts as a hobby, open an Etsy store and sell them.
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Barter babysitting with a friend with kids. Barter anything you can think of to save money. If traveling for a long vacation, ask a friend to drive your car and drop/pick you up at the airport (either return the favor or pay a mutually agreeable amount). You might save hundreds of dollars on parking.
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Avoid buying processed foods and cook from scratch; this will save money, reduce calories, and improve your health.
Do not think of the sacrifice think of the reward. This will keep you motivated.
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