Want to build an Emergency Financial Safety Net. Are you ready for a financial emergency? If this year in our lives has taught us anything, it is that many in our society just aren't ready for that emergency that takes away steady income. While I have been blessed to be in a place where finances are not a constant worry right now, I understand and have been in situations where it is a 24/7 worry. That's why I wanted to share with you some tips for creating a financial safety net and how to really use your time and money wisely to provide for your family.
How to Build an Emergency Financial Safety Net
If you don't have emergency savings set up, you may be struggling right now. Everyone around us is scrambling to manage bills, debts, and just basic necessities. This is known in 2020, and while worrying, it does not have to be the future for you and your family. We may not know how things will work in the coming months, but you can put into place a financial safety net starting now, even without a steady income.
Start by Understanding What Your Bottom Line Income Needs Actually Are
What would happen if you didn't have an income for a month? Three months? Six months? A year?
Everywhere around us, people are experiencing these fears right now, but you can overcome them and be prepared for this in the future. While you never want to see it happen, the truth is that our futures are unclear. So, building that safety net is a must. Below are a few steps to begin.
- Look at all of your current bills and determine which are mandatory (lodging, food, insurances, transportation, communication) and make a list of accurate costs.
- Make a list of unnecessary but useful things like full cable, extra streaming services, higher speed internet, and subscriptions that you use regularly, but could be okay without if needed.
- Now, make a list of the wants that you normally have on hand like special treats, entertainment or vacation expenses, shopping budget, or "fun money".
Note: Make sure that your first column also includes both disability and life insurance policies. While most of society considers these to be an "extra" they are a safeguard that is a must in my opinion. They are the biggest part of a known way to bail yourself out should something tragic happen. Nobody wants to think of those things, but they happen, and preparing for them will make it easier should it happen to your family.
Using these numbers to create actionable goals
Once you have these three lists in place, set them up in a spreadsheet or columns and determine the three levels of income you would need to cover them. Start with the musts - what is the absolute least amount you need to JUST survive. Then, a list of surviving with a few extras that help make it easier, but could live without. Finally, make a list of the full current expenses with extras that aren't necessary at all. Now you have the 3 levels of income you would need if something happened.
- Your goal is to have 6 months of savings equal to the 1st column needs. This would be your emergency fund for covering your family needs for at least 6 months should something bad happen to your family or income source.
- The next goal would be to fund everything in columns 1 & 2 for 6 months.
- Then, focus on saving enough for everything in all 3 columns to be funded for 6 months.
Once you reach that 3rd goal, break down how many months that amount would cover of just the 1st column. Ideally, you want that number to now be at least 1 year of the 1st column. Then, anything extra could be divided if needed.
This helps create actionable goals for you to follow later. As you are able to start building this safety net, make sure you are putting it into a secured interest-bearing savings account. This way the money, while being saved, is earning you money.
How do you create a financial safety net when unemployed or underemployed?
This is the big question. The one everyone wants an answer to and is truly the hardest to predict. There are a few things I can share with you, but this is the time to dig deep into your own skillset. You will have to determine how you can make this change to provide for your family both now and in the future.
We know that generically when employed you can and should be setting aside money each pay period toward savings. Even if that is just a $20 goal per month, it will add up to more than zero. Anything more than nothing is something. Something is usable. So, starting with a small amount is much better than doing nothing.
If unfortunately, you are underemployed or unemployed and can't find any "extra" by cutting out the things in columns 2 & 3 for a few months, then it's time to think outside the box. Below, I will give you a list of things that have been useful to me and others for creating even small amounts of added income to go into savings.
Ways to earn income outside of traditional jobs
I am simply going to list ideas below that are useful and can be a source of income. Feel free to add comments of anything that you have done to earn an extra income online or outside the home aside from your normal employment.
- Sell fresh produce from your family garden. Planting just 3-4 extra rows of common vegetables is an easy way to make $50-$100 per week during summer months. Use these tips summer gardening tips to grow more veggies to improve your production for selling.
- If you have a bachelor's degree try signing up to teach kids English online through programs like VIPKid.
- Use direct sales programs if available to you that have a low start-up cost and offer a product you know others need. Companies that are commonly needed are things like household cleaners, essential oils, or books.
- Start learning about graphic design and create worksheets for kids or teachers to use and sell on platforms like Teachers Pay Teachers.
- If healthy, take kids in to babysit in your home while parents work outside the home.
- Create and sell homemade clothing, crafts, or gift items online through Etsy, Amazon Handmade, eBay, or RedBubble.
- Participate in drug trials for medications that may fit the current conditions you have.
- Thrift shop or hit garage sales to find items you can flip online for a profit.
- Participate in retail arbitrage and resell items on eBay or Amazon FBA.
- Create t-shirt designs and use a program like Printify or Printful to sell your products online to others for a low fee and no inventory needed.
Need More Ideas for Financial Security? Check out these links!
- 12 Month Printable Budget Planner
- Tips for Creating a Household Budget
- What to do When You Overdraft Your Checking Account
- How to Eat Well on a Budget
- 10 Creative Ways to Save Money