Building an emergency fund can feel like training for a marathon—you hope to start slow and keep up a steady pace but it sure can feel like a pretty tall order. So, let’s dive in and talk about how you can stay energised and overcome savings stagnation!
The Savings Plateau
Picture this: you’re dead set on saving up for a fully funded emergency fund. You've managed to set aside $4,000, but it feels like a comfy safety net, and your savings stall. This plateau is common. It's easy to feel secure at certain levels, making it harder to push beyond them.
Understanding Your Savings Behaviour
Think of your savings journey like climbing a mountain. Each time you reach a new plateau, you catch your breath and assess your surroundings. It's totally natural to pause at certain amounts before pushing higher.
Setting Realistic Goals
The ultimate goal of an emergency fund is to cover at least three months of expenses. For most, this is between $10,000 and $20,000. But that can seem huge, especially when starting out.
Minimum Savings Milestones
To make the journey less daunting, consider setting smaller milestones along the way:
Covering a Major Expense: At a minimum, your emergency fund should be able to cover an expensive dentist bill and a car replacement. Whatever that means for you. This can give peace of mind for those unexpected, but inevitable, big expenses.
Incremental Goals: Aim to reach increments that feel achievable to you, like $1,000, $5,000, then $10,000. Celebrate each milestone as a victory and use that momentum to keep going.
The Final Stretch
Once you’ve established a comfortable emergency fund that covers three months of expenses, you can start to feel truly secure. It’s important to remember that building this fund is a marathon, not a sprint. It’s okay to take breaks, assess your needs, and adjust your goals as you go along.
Keep Moving Forward
No matter where you are in your savings journey, the key is to keep moving forward. Whether you’re at $1,000 or $15,000, every dollar saved is a step toward financial security. Take a deep breath, enjoy the view from your current vantage point, and when you're ready, start climbing again.
Remember, you’ve got this! And if you ever feel stuck, revisit your goals and remind yourself why you’re saving in the first place or if you need more support, get in touch with the Lemmi Advice Team.
Your future self will thank you.