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Essential Guide to Better Money Habits

Essential Guide to Better Money Habits

Our lives are a product of our daily habits. Our bank balances, level of debts, net worth, income, health and happiness are the result of the unconscious routines that we engage in each day from the moment we wake up. Habits may serve you or […]

In a rut: Help for when you’re stuck

In a rut: Help for when you’re stuck

Stuck in a rut. Spinning your wheels. Going around in circles. Getting nowhere fast. It’s not that you’re not working hard, it’s just that you don’t seem to be getting anywhere. First you feel a bit of an irritation. Then the anxiety sets in and […]

4 Fun Ways to Save An Emergency Fund & 1 Boring One

4 Fun Ways to Save An Emergency Fund & 1 Boring One

April was an expensive month. Not because of the interstate wedding we attended. Not because of the weekend spent away with my family for Easter. These were all planned.

It was the unexpected that added up.

In the space of two days:

  • We got three chips in our windscreen;
  • A flat tyre on the motorbike;
  • Our laptop died a sudden death;
  • The cordless phone battery started going flat 10 minutes into a conversation;
  • The pram had two out of three tyres go flat when we were 20 minutes walk from home.

Total cost of replacement and repairs: $1,400

Was it bad luck or just life’s up and downs?

What’s luck got to do with personal finance?

I have a friend who relishes in telling me all the things that go wrong in her life. Her woeful financial situation is due to her horrible luck.

Every time I talk to her, her car just broke down, her cat swallowed her grandmother’s diamond ring, she needed to see the GP 5 times for a mystery swelling on her lip and her toilet started leaking.

I always end up feeling sorry for her and wondering if I should help her out. After all, how come things just keep on happening to her all the time?

And then I remember that most of her issues could be solved if she was financially prepared for the unexpected instead of “not having enough time” to go grocery shopping, packing lunch or parking in free spots.

I used to be fatalistic. I used to believe that luck determined how your life turned out. Not anymore.

I now believe you make your own luck. You’re in charge and you can go after the life you want.

And you know what? That’s a lot more empowering than waiting for a lucky break. Waiting won’t change your life for the better, but taking action will.

Being prepared for the unexpected

I don’t believe my friend is any more or less lucky than the rest of us, but she makes a bigger deal out of the small stuff that happens.

Because really, the unexpected isn’t so unexpected. Appliances break, drivers have accidents, people get sick, phones get lost. These things suck, but they are around the corner for all of us at some point. If you’re prepared, then the financial outlay is more of an annoyance than a burden.

A short term emergency fund is the difference between being bumped along the road of life versus thrown into credit card debt or having to ask for loans from family.

A rule of thumb is to have $500 – $1,000 saved up for short term, unexpected expenses in an account that offers a high interest rate but is easily accessed.

The general advice appears to be that saving for a small emergency fund should be prioritised ahead of paying off debt, but please remember to get advice for your own personal situation.

Initially it’s probably worth forgetting about the long term emergency fund. You’re not aiming for 3-6 months worth of living expenses, just enough to buy a new washing machine, repair a flat tyre and take your cat to the vet all in the same week if the need arises.

If you don’t have a history of savings, then the trick is to start small.

5 Ways to Save For An Emergency Fund

Idea 1: Round It Up

Here’s an idea for your loose change. Every transaction you make through the day, round it up and save the difference. You could go super aggressive and round up to the nearest $5 dollars or ease into it, by rounding to the nearest $1.

Keeping track is probably the biggest challenge. There’s a fancy app that can do this for you from Acorns but this goes into an investment account which isn’t ideal. The alternative is noting it in your phone (or on paper like the dinosaurs) which will also provide terrific accountability for your spending.

Effectively, the more transactions you make, the more opportunity you have for saving. Then again, this might give you an incentive to put your wallet away; it could go either way.

Idea 2: Most Creative Ways to Save

The challenge here is to find the most creative way to save or earn money each week. Set an amount you’d like to save and then figure out the most creative way to do it. Scour the internet for ideas, start a side hustle, challenge yourself to try or give up things you wouldn’t normally do.

Each week try to go above and beyond what you did last week.

Idea 3: Mix It Up With Bingo

Great for those who are handy with scissors and love Bingo! Make saving fun by playing Bingo! The object of the game is get a line and fill up your account at the same time. Each week, draw a random number from a hat, deposit that amount into your savings account and cross it off your card.

Of course playing with a friend makes it even more fun. First one to a thousand wins!

Idea 4: Throw Out A Challenge

Casually throw out a challenge to your friends, co-workers, facebook or the Fun ways to save moneyblogosphere to see who is the best (at saving). You’ll need to agree on the savings goal, whether it’s a fixed amount, a percentage of your after tax income or the spending decline and a fun, but inexpensive prize.

The loser might for example walk the winner’s dog for a week. Or the loser might make a 6 course degustation dinner for the winner.

Idea 5: The Boring One – Automation

This may be the most boring one, but it’s the easiest and once you’ve got it set up, you don’t have to think about it again.

Put the ‘pay yourself first’ principle in action and set up a weekly transfer to a high interest savings account. Schedule it for when your pay check comes in and you’ll be saving money before you even knew you had it.

If you don’t think you can live without any of your pay check, then start with a small amount. Obviously the smaller the longer it will take, but remember the aim is to save an emergency fund, not to do it in world record time which if you’re wondering is 1.2 seconds.

I totally made that up. Any amount is great, just get started now!

Save $1000 in… 1 month 2 months 3 months 6 months 12 months
$250 a week $125 a week $76.92 a week $38.56 a week $19.20 a week

 

Do you believe in luck? Can you think of other fun ways to save money?

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5 Ways We Save $2,000+ A Year Without Giving Anything Up

5 Ways We Save $2,000+ A Year Without Giving Anything Up

Saving money doesn’t have to be all about making sacrifices. Of course you could spend the night in, eating baked beans on toast, while watching a borrowed DVD that skips, because you’ve given up eating out, meat and cable to save costs. These are totally […]