Having your finances under control can be a really hard task, but it’s essential for you to have a balanced and healthy future with your finances.

That is going to create a better future and more tranquility in your day-to-day life.

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But even more than that, it is important for you to consider all the important situations that can happen that can change and hurt your financial stability.

You must learn how to deal with unforeseen events.

This is why one of the basic things you must learn about financial education is how you can create and maintain an emergency reserve.

The reserve is going to be like water in the desert when you most need it. It’s going to be there for you and to help you all the way. Its use is, of course, to help you when you have unexpected expenses.

With this product, you’re going to be able to not only have better financial situations but also more financial security, and you will not be so afraid of the future because you’re going to have something that has your back any time possible.

What is an emergency reserve?

An emergency reserve is an amount of money you can use when you actually need it for unforeseen events.

That way, it can cover all of your expenses in a certain amount of time so that you can have calm and tranquility until you find another way to deal with it.

It doesn’t matter how good your financial control and your financial situation are.

Things happen, and it’s not always something that is going to be in our control, which is why having an emergency reserve is going to help you a lot. Because it is always better to be safe than sorry.

Remember, financial problems are not something small. It can cause you to go into deep debt.

So having an emergency reserve is going to help you. Having that amount saved so that you can cover your life costs for a few months is going to be important.

Of course, the best way to actually save money is to invest it so that it can always grow when you’re not even using it, so be aware of that.

How much should you have in your emergency reserve

An emergency reserve is not something that you can calculate specifically mathematically for everyone. It would be unfair to actually do that because we are not the same.

Everyone is different; everyone has different situations, different lives, different families, and even errands. Which is why it’s important for you to learn that we can’t give you a specific answer.

But we have a few theories that can help you. For example, studies show that the safest and minimum amount that you can have in your emergency reserve should be enough to cover six months of your expenses.

So that way, you can actually have enough time to get your life together without having to worry about your money. That is extremely important, especially if you lose your job or something like that.

So if you want to have enough for that, you must make an addition. So you must make a spreadsheet with all your expenses. There, you will write everything down and add everything so that you can have a certain amount.

Imagine that you use $2,000 every month. Then your emergency reserve must be at least $12,000. That, of course, for six months.

If you want to go over it, and the actual recommended amount is around 12 months, then you would need $24,000. So, as you can see, it’s a lot of money, but little by little, you’re going to be able to.

Of course, there is always the ability to make bigger reserves. It doesn’t need to be exactly $24,000. You can have way more if you want to, and if you feel safer with more, then go for it. It is actually even better if you make it bigger.

How to organize your finances to start a reserve

Now that you already want to start the reserve, you need to organize your finances, but it’s not an easy thing. You must have a lot of money and time in order for us to help you with that.

And seeing the amount that we’ve mentioned above, it might seem impossible to actually have one, but believe us, it is going to be a really long way for you to actually get it. But it’s going to happen.

To help you out, we’re going to bring you a few tips so that you can learn how good financial management can help you with your financial reserves. Down below, we’re going to tell you everything, so take a look.

You must be realistic

If you have someone close to you who has an emergency reserve, and you see that you have a lot of money, and they save a big amount, then you can forget all of that.

You can’t compare your savings to those of other people because it would be completely unfair to you and to the other person.

How much you earn is completely different from how much that person earns, and your situation financially and your expenses are going to be completely different too.

You may have priorities that they don’t have, for example, a family. And if you have more expenses, you’re not going to be able to save more.

Sometimes you can only save a little amount every month, but still, it is saving and it is important. Be realistic, and don’t think you are going to be able to get the $24,000 in two months.

It’s going to take years to do that. And there is something that you must get into your head before even starting.

Also, you must be realistic while using money. Saving money is really hard, so you must start being realistic.

You must define your priorities, what you’re going to use the money for, and how you can actually use it responsibly. Control their finances better. Give your priorities actual priority. And if, at the end of the month, you only get a small amount, then so be it.

Also, remember to analyze and write everything down, no matter what your expenses are or what you do. Having all of your expenses written down and on Excel sheets is going to help you control everything way better and start saving way faster.

Pay your debts

The next thing you must do is going to be to pay your debts. You can start a financial reserve if you still have things to pay for.

So if you are someone who actually needs to pay for your things, then you must start with that. That is your priority.

Start paying for the older debts because those are the ones that need real attention, since the longer that you don’t pay them, the higher the interest is going to be.

So only when you pay for all of them can you start paying for the newer ones.

But the first step to all of that is learning all the debts that you have. Take another spreadsheet and write everything down.

All of them, the amount that you need to pay, and the day that you need to pay them. If you are in real trouble with them, you can start by talking to the company and trying to renegotiate them.

You can even consolidate your debts to make everything easier and faster.

Have goals financially

Having goals is very important, but more important is having financial goals. You can start saving just for saving. You’re not going to have any backbone for that.

It’s like when you decide to learn a new language just because you want it, and then a week later you completely give up because you’re not interested. You don’t have a goal to learn a language.

Now if you had to learn a language because you have a job that needs that language or because you’re going to a different country, then you would put more effort in because there’s an end to a means.

The same goes for finances. You must have a goal.

Your goal might be to try to make a better future for yourself, might be to prepare yourself for different situations, or even might be because you want to go on vacation in the future and you want to start saving now.

In this case, your goal is going to be to prepare yourself for unforeseen situations. Have that in mind, and you’re going very far.

How do you do an emergency reserve?

Now that you already know what you can do to make the reserve something that actually works each time, let’s take a look.

Define your monthly expenses

The first and most important thing is to define your monthly expenses. Get a spreadsheet on Excel, or you can get one on Pinterest that already has a layout that you like, and you can start writing everything down—every single expense, anything.

That goes for rent, extras, and school supplies. Anything that you have. Then you can see the fixed expenses and the variable expenses. Fixed expenses are the ones that never change.

For example, your monthly rent will never change. Your apartment will always be the same every month. If you have any school payments that you need to make, they are usually the same.

Now the variable expenses are like your monthly electricity bill, your water bill, or even the Internet. And of course, if you have any extras, like going out, take out and things like that, you must separate the specific amount that you want to have.

Calculate your living cost

After identifying all of your monthly expenses, it is time for you to actually learn how much you need every month in order to live freely.

To have a realistic vision, you must have an idea of the different costs. For example, consider how much you’re going to expect every month. You have to add everything up, and you’re going to have an amount specified for that.

Take control of your expenses

Sometimes you might feel that your expenses are under your control, but believe us, it is not like that. You just need to have better tips and strengths. You must organize yourself financially.

After you know how much you must have every month to pay for your essentials, you must see if you spend more than you earn.

If you see that you can’t pay for everything, then you must start cutting stuff. For example, there are things that you don’t really need, like extra stuff like takeout, cable, streaming services and all of those.

You can then switch from a more expensive brand to a cheaper one, and even use more discounts on purchases.

When should you use your emergency reserve?

After all of that, you might have some questions. One of them might be where you can use it, and when do you know how to use it? The thing about emergency reserves is that they are yours.

This is your money to do whatever you want. But you can only use it when you actually need it in an emergency. The emergency reserve should always be your last resort.

So, if you have any problems financially, see other options that you might have without applying for credits. If you don’t have any other option, then you can use the emergency reserve.

But remember, there is never a wrong way to use it during an emergency; you just need to be careful with it.

Creating an emergency reserve is important

Now that we have reached the end, we want to tell you that creating an emergency reserve can seem harder than it is. But believe us, it is way faster and simpler if you follow these tips.

Remember, you are not going to achieve greatness with it in just a few months. Good luck.