The philosophy of “living here and now” is great only when you have an emergency fund. Every expat should save money to adapt to new realities, be able to afford to travel, and have a high standard of living. Read on to learn how to start saving money and build an emergency fund.
What is an emergency fund?
Do emergency savings differ from the regular ones? The emergency fund definition goes like this: “money stashed away that people can use in times of financial distress.” They are financial assets you don’t touch until something serious happens. It’s usually cash because you’ll need quick and easy access to your emergency money.
In a new country, it may be even harder to handle some financial issues without the help of your family and friends, so having some savings is especially important for expats.
How to start saving money?
Before saving emergency money, take some preparation steps.
- Deal with the burden of your past—pay off your debt. Say goodbye to credit cards, friend loans, and store cards.
- Analyse your spending. Check subscriptions, prioritise expenses, and decide what you can cut out.
- Set short-term realistic goals. Playing big is cool if you don’t lose motivation. So, be real and make your target achievable. For example, aim to have a 3-month-worth emergency fund by the end of the year.
Be a strategist
After understanding what an emergency fund is, you can start planning.
Calculate how much you need to save each month
Assuming you spend 2000 EUR monthly. Then, your emergency savings for 3 months will equal 6000 EUR. If you want to achieve this goal in one year, put aside 500 EUR from every salary. If it seems unrealistic, adjust your goal. Use emergency fund calculators to have a clear vision.
Pick your tools
There are numerous opportunities for saving money. Including:
- Simply keeping cash at home.
- Using apps for automatic savings: Qapital, Plum and Digit.
- Opening a savings account to earn from interest.
How to start a savings account? Choose your provider (a traditional or an online bank), pick the account type and apply online or in-person with all the required documentation. The process is quite simple, especially if you’re a bank’s client already.
Decide on the currency
As an expat, you live two lives in two countries. If you support your family or plan to return soon, saving in your home country is a better choice. On the other hand, for a long-term stay, having emergency savings in a new location is wiser.
Ideally, you should hold two emergency funds in different currencies. To avoid losing money on exchange rates and fees, you can use the online service Profee to transfer money from Europe to over 90 destinations. You can send funds to bank accounts, cards and mobile wallet services like UzCard in Uzbekistan, UPI in India, PayMaya in the Philippines and more. Profee helps you to not overpay for transfers and save money efficiently.
Stick to the plan
The best strategists know the road may be challenging, but the results are worth it. Don’t become a victim of impulsive buying, and constantly remind yourself why you started. Follow the plan, manage your budget and be flexible.
Budgeting methods
Here, we’ll share some of the budgeting methods that proved their efficiency.
Pay yourself first
The idea is to treat your savings like a bill. Close it every month, and don’t think of ignoring it; you know what happens to those who don’t pay bills.
60% solution
60% of your income goes to committed expenses, 20% to savings, 10% to retirement and 10% to fun. You can adjust the percentages according to your current situation.
Value-based planning
Divide spending into your personal values (travel, comfortable living, health, future wealth, etc.). Cut spending that does not align with the “core” values.
Explore: How to save money on travelling.
Daily/weekly spending limit
For some, it’s easier to rack their expenses every day or week. If that’s the case, set a limit and follow it. Include an obligatory saving amount, too.
0 spending day
Occasionally, participate in no-buying challenges. Don’t purchase anything; find free entertainment and touch some grass.
Conclusion
In this article, we covered the emergency fund definition and tactics, and discussed how to start saving money and how to start a savings account. Make some preparations, calculate your goal, download apps and transfer money back home with Profee to become a financial guru.
