Being unemployed is stressful in every way and to add to your worries, majority of the Americans even don’t have enough dollars kept aside to pay off their monthly bills if they remain jobless for more than few weeks. How can you avert this extra tension of becoming delinquent on your accounts during a time when you already don’t have a fixed source of income? You can create a fund for emergency and start preparing for potential unemployment.
According to NerdWallet, it was studied that the Americans never save money to ward off common emergencies, among which the most crucial is unemployment. After including average annual savings and state unemployment benefits, there are many who still fall short of thousands of dollars. Among the people who lose their jobs in America, the average time that they spend being unemployed is 26 weeks. As a matter of fact, most of the unemployment benefits of a state are paid till 26 weeks and not more than that.
Building your unemployment fund – How much should you save?
Remember that the best time during which you need to save money is when you don’t need it. In layman’s words, you should keep saving money throughout your employment period. When you successfully build an emergency fund, this means you would never have to incur debt as you would have enough through a rainy day fund.
You also need to consider different life circumstances before deciding how much to save. In case you live in dual-income household and you don’t have a house of your own, this means you would require paying extra costs for maintenance and for all these, 3 months of savings wouldn’t be enough. But if you’re self-employed and you work in an industry that’s volatile, you should save more as layoffs are very common there.
Ensure that you’re saving 3-6 months of expenditure and not income. Hence, if you can successfully eliminate the expenses when you’re unemployed, you can soon lower the monthly savings amount. In case your present monthly expenses are $3000 but you know you can cut down $500 when you aren’t working, your monthly emergency savings would then be $2500.
Successful ways to save for unemployment fund
Saving a 3-6 month cushion could possible take many months or even years. But you need not feel discouraged for that. If you wish to free up cash, you have to earn more and spend less. Contribute part of any windfall as inheritances or bonuses and tax refunds to your emergency fund. You can easily increase income, decrease expenses in comfortable ways like selling unused things, cutting down your cable connection, cooking at home instead of eating out and requesting a raise. You can even set an automated transfer of money from your checking account to your saving account that’s high-yield.
By following the above mentioned ways, you can possibly be able to save money for your unemployment fund. Whatever may be your situation, don’t forget to keep saving money.