An emergency fund is one of the pillars of personal finance. Having a sizeable emergency fund might secure your financial future and safeguard against financial crisis. Emergency fund shields you from borrowing money at a high interest. For example, a $10,000 unforeseen medical expense, if paid with a borrowed money, will require you to pay almost $20,000 over the years, including interest charges. That’s a lot of money. If you have $10,000 saved in an emergency fund, you can pay without borrowing the money.
One big problem is people understand the benefits of having an emergency fund but to actually build one when you’re barely scraping by seems like a daydream. Building emergency fund from scratch is a hard task. Let us talk about a few tricks on budgeting your money to actually build an emergency fund without having a big income.
Why it is hard to create an emergency fund with a low-income
When you are barely saving or rather, surviving paycheck to paycheck. Saving a part of your income is a dream, a near impossible ask. If you set a target of saving $300 a month, there will be some months where you’ll actually have to draw money from the saving kitty, let alone contributing $300 in that month. Our expenses vary due to unforeseen events.