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Start Small with Emergency Fund
Emergency Fund- Start Small, Think Big!
Many people wonder how they can build an emergency fund when they’re trying to pay off their debts. It isn’t as hard as you might think. The strategy is to start small, change a few habits, and change your mindset.
If you’re starting from scratch with your emergency fund, begin by saving $1000 (or $500 if it would take too long to get to $1000) while paying the minimum on your credit cards. When you have that emergency fund started, turn your focus to your credit card debt and pay more than the monthly minimum. Once the credit card debt is paid off, go back to building your emergency fund.
Alternating Payments & Deposits
If your credit card debt is very high and is creating extra stress, you might try alternating the extra payment every other month. The first month, add to your emergency fund and pay the minimum on your credit cards. The next month, pay more on your credit cards and skip the deposit to your emergency fund, etc.
Ideally, you want three to six months of living expenses in your emergency fund long term. Pay off those credit card debts, and get started on that ideal emergency fund.
Getting Started
Here are five ways to boost your emergency fund and change savings habits for life:
- Pay Yourself First! Treat savings as a bill. Figure out what you can afford to save each month and stash away $75, $50, $25, or even $10 a month. No matter the amount, it adds up and can become habit-forming. As your financial situation improves, increase the amount.
- Live one raise behind. When you get a raise, don’t begin spending more. Instead, apply the extra amount to your emergency fund.
Use Technology to Your Benefit
- Automate it. Set up an automatic transfer to your emergency funds account. When the credit union receives your direct-deposited pay check, you can have a portion of it put directly into your savings or emergency account. Out of sight, out of mind, but you know it’s there if you really need it.
- Give savings a garage-sale boost. Go from room to room in your home and purge stuff you no longer want and need. Then schedule a garage sale. It’s Spring here in Central Oregon, or “garage-sale” season! Both your house and your savings will look better.
- Think of it as a life jacket. If you can’t find that initial spark to get started, ask yourself how you’d pay your bills if you lost your job tomorrow. Having an emergency fund will help you keep “your head above water.”
Remember: At Mid Oregon Credit Union, we are ready to help with all your savings needs. Call us at (541) 382-1795, email us, or visit one of our 7 Central Oregon branches to set up short-term and long-term savings vehicles that fit your needs. Or visit www.midoregon.com for more information.
Start Your Financial Journey With a Map!
A Journey Without a Map
To gain control of your finances, it’s important to set specific financial goals. But what does that mean? It means having a plan when you start your financial journey.
Here’s an example: If you simply say, “I need to pay off my credit card debt,” you’re less likely to reach your goal. In reality, you have just made a wish, with intent and desire, but nothing to get you any closer.
We readily recognize this in other areas of our lives. If we are taking a vacation through an unfamiliar area, how many of us would just jump in our vehicle and go. We would use GPS, grab a map, or at least ask someone for directions. And wouldn’t we also figure out if we have enough fuel, and if the car was able to make the trip!
Set SMART Financial Goals
Of course you would. So, to achieve your financial objectives, you need more. That’s why at Mid Oregon we recommend you start with setting SMART financial goals.
We’ve created a short video on setting SMART goals. Take a look and start your financial journey the right way. You’ll be glad you did!
Science Agrees: It’s Tough to Save
We can teach our kids to save—and maybe start a new habit for ourselves—during Credit Union Youth Month.
The Science of Saving
Saving your money isn’t always easy, especially when you don’t have a lot to spare. After paying all your usual expenses, there may be very little “fun” money at the end of the month. When we do find ourselves with some extra cash, like a tax refund, many of us rush out to buy those shoes or that electronic gadget we’ve had our eye on for months instead of putting it into our savings. It’s tough to save!
Why do we do that? Why do we spend the money we planned on using for our future?
We can blame it on our brains. Behavioral science has shown that humans are hard-wired to act on impulse and that it takes conscious thought to delay gratification. It’s also much easier to focus on the present than our future.
Focus on your future self to spark savings urge
To help you save for your future, behavioral science suggests visualizing yourself as you might look when you’re older. For instance, if you want to save for retirement, imagine yourself at age 67, living comfortably, maybe travelling the country, or having the time and the means to do something you’ve always wanted to do.
According to a study done in 2014, this technique works. The researchers took photos of 50 college students and digitally altered each person’s photo to make them look 70 years old. The participants were instructed to study the photos. Then they were told to imagine receiving $1,000 and were asked how they’d like to use the money: buy something now for a special person or for an extravagant night out, or put that money into a retirement fund. After seeing a photo of themselves at 70 years old, the majority allocated more of the money to their retirement fund than to the other options.
Replace bad habits with good ones
Another way to help you save for your future is by making it a habit. Start with small goals. For instance, commit to putting a certain amount, say $10, into a savings account every week. If you have direct deposit, you might want to consider setting up an automatic transfer of $10 into your savings account every time your paycheck is deposited. Over time, you can gradually increase the amount by a dollar or two.
Teach your kids to save
Okay, so we’re not perfect. But we can help our kids to do better, and start them off with some healthy financial habits. To help your children get into the savings routine, start by having them cut out pictures of something they’d like to have someday and post the images where they’ll see them often. Then help them open a savings account if they haven’t already.
At Mid Oregon, your child can open account with as little as $5—and we’ll waive the membership fee for kids 17 and under. Encourage your child to make regular small deposits each week or month. Tell them their money will earn interest while it’s in their account. If they keep this routine going, they’ll quickly see their savings grow. You can even use our savings calculator to help them see how fast their savings will grow!
This April, we’re celebrating Credit Union Youth Month. When you open a Mid Oregon savings account for your child or grandchild, they’ll receive a free Moonjar® moneybox to help them manage their money. The Moonjar moneybox is a three-piece savings bank that encourages children to plan how they Spend, Share and Save. The Moonjars are available while supplies last, so stop by soon and help your kiddo learn the science of saving!
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