We tend to not think about emergencies until we’re stuck on the side of the road with a car problem and no money in the bank to pay for a mechanic. Like financial expert Elle Kaplan says, “building an emergency fund isn’t about pessimism - it’s about practicality.” But can be tough to figure out how to start saving for one. So here are some of the expenses you should prepare for this year and how to save for each one.
You've made a career change—the good or bad kind - It doesn’t matter if you’re the victim of layoffs or you’re moving to a new job in a profession you love more but pays less, you could face financial issues either way. What Kaplan advises is having money to cover six months of living expenses set aside in an emergency fund specifically for this occasion. And that’s a lot of money to save. She suggests setting aside a little from each paycheck into savings so you don’t notice it as much.
Your BFF is getting married and you need to get her a good gift - Now that there’s a wedding date on the calendar, you’ll need to start thinking about your gift buying options. You might be tempted to buy a present on your credit card, but that’s not the best way to go. Instead, set aside the money you’re spending at Starbucks a few times a week to help you create a savings account for gifts you’ll need in the future.
Your brake pads need swapped out - Even if your car is new, at some point you’ll need to do repairs and you don’t want to have to go into credit card debt when that happens. So Kaplan suggests the easiest way to beef up your broken brakes fund is to cut back on your travel expenses. Ride with friends to dinner, carpool with a coworker to the office, and organize your errands so you’re not driving more than you have to. Then save your extra gas money for future car issues.
Your water heater breaks, mid shower, of course- Homeowners never know when something is going to break and need to be fixed or replaced. So save for home-related expenses by staying home for date night once a month instead of an evening on the town and stashing the money you’d spend out.