Here’s How You Can Finally Get Started On Your Emergency Fund
So you have finally decided to build up your emergency fund.
But, honestly, getting the ball to start rolling is the hardest and most difficult task of all.
If you are really keen on reaching that savings goal, here are some neat (and proven) challenges that will help you trick your mind into finally setting aside some money for the rainy days.
1The 35-Week PHP 5000 Savings Plan
One of the best ways to get yourself motivated so you could finally start building that emergency fund is to create a goal that is attainable and specific.
How do you do that?
Start with a goal amount that you believe you can achieve regardless of what happens within that span of time. For this savings plan, we’ve decided to make PHP 5000 our end goal, which should be achieved within a 35-week window.
Next, trick yourself into saving a particular amount every week. But, instead of adding more to the weekly savings amount, you slash it by at least a peso, so it wouldn’t feel like a huge obligation. Cool, huh?
Start off by putting aside PHP 160 for the first week then reduce your savings by a peso a week. This means, you save PHP 159 on the second week and PHP 158 on the third until you reach PHP 130 at week 35.
By the time you complete the 35-week challenge, you should have already set aside PHP 5005 which will help you get the ball rolling.
2The 52-Week Challenge
The 52-week challenge is one of the most famous savings challenges, especially in the US. Originally, people start with $1 a week and increase it by $1 each week until they put away $52 on the 52nd week.
The 52-week peso challenges come with numerous versions.
You can go for one-peso increments to get a total savings of PHP 1378 by the end of the year. A five-peso increment will give you PHP 6890 in the end, 10-peso increments total PHP 13,780; 20-peso increments total PHP 27,560 and 50-peso increments can reach up to PHP 68,900 in 52 weeks.
The secret here is to be consistent with your weekly goals and to make sure that you choose increments that remain achievable even as you get closer to the end.
You can also invert the challenge so you start off with the biggest weekly savings goal and then gradually reduce it week after week.
3The One Percent Challenge
Although the 52-week challenge sounds very promising, it also poses a less sustainable way to build your emergency fund.
At the start of the challenge, people may find it so much easier to start it off but struggle to set aside more money at the last quarter of the year. If you go for 50-peso increments, you start off with just PHP 500 for the first month but end up having to set aside more than PHP 10,000 by the 12th month.
Instead, a more manageable and realistic alternative can be followed: the one-percent challenge.
For this money-saving challenge, a person saves at least one percent of their income for the first month and then gradually increase it by one percent each month until they set aside 12 percent of their income by the 12th month.
This means that if you have an average income of PHP 20,000 each month, you set aside PHP 200 for the 1st month, PHP 400 on the 2nd and so on until you reach PHP 2,400 on the 12th month.
The goal amount isn’t as high as in the 52-week challenge but it helps give you something to start with and also pushes you to build the habit of saving. In addition, you no longer have any excuse because you can still set aside a percentage of your money regardless of how little money you make every month.
Philihappy Pro Saving Tips:
- To make sure that you can follow-through the savings challenge and that you do not get tempted to save after you spend, set up your accounts so it automatically transfers your money to a separate savings account. BPI has a similar program called the BPI Save-Up that allows you to automatically transfer a set amount to a linked account on a regular basis.
- If you still get tempted to use up your emergency fund for non-emergency items (a sale obviously does not count as an emergency), open an account that will make it hard for you to withdraw money. You can try opening a passbook account and skip on the ATM at a bank that isn’t very convenient for you. Of course, you will have to make sure that you make your monthly trip to deposit the money you have set aside.
- Invite your friends and family to take on the challenge. Often, it becomes much easier to develop good money habits and reach savings goals when you have accountability partners with you. Try to stay away from people who are spend-happy unless they are really dead set on changing their money habits.
And keep at it. Nothing great ever came that easy.