Yahoo Finance Lose Your Nest Egg Paying for an Emergency? 11 Expert Tips on How To Bounce Back
Say your dusty car finally calls it quits. Or you need sudden hospitalization that racks up a ton of bills. Emergencies like these can easily eat up your hard-earned savings. But this doesn’t mean you should despair.
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As Michael Ryan, finance expert at Michael Ryan Money puts it: “Dealing with a financial setback like wiping out your nest egg due to an emergency or debt is emotionally and financially draining, but it’s not the end of the road. It’s a hard lesson many learn, and it often serves as a wake-up call to take control of your financial future.”
If you’re stressed about how to recover these losses, here are 11 expert tips to help you rebuild your nest egg.
Emergency Fund First
The first step in bouncing back is rebuilding your emergency fund, Ryan explained. “Without this safety net, you’ll find yourself in the same precarious position should another unexpected event happen.”
He recommends aiming to stash away at least three to six months’ worth of living expenses.
Carl Jenson, finance expert and founder of Compare Banks, recommends creating a precise budget that takes your present financial condition into consideration.
He said, “This can assist you in determining your critical spending and identifying areas where you may momentarily cut back to put income toward rebuilding your savings account.”
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Create a Debt Strategy
After having a well-stocked emergency fund as your initial line of protection against future financial calamities, Jenson notes it’s also important to examine your existing debts and devise a strategy for managing and lowering them.
“Consider debt consolidation or talking with creditors to make payments easier to handle,” recommended Jenson.
Experts agree that by lowering your debt, you free up more of your income to cover essential expenses and build a new financial cushion.
Revamp Your Savings Strategy
Next, you need to look at your monthly savings strategy.
“Turn on automatic transfers for a portion of your paycheck directly into your retirement fund,” said Ryan. “Automating this process removes the temptation to skip contributions.”
Get on a Budget and Use It
If you’re not already on a budget, get one going, said David Bakke, a personal finance writer at Dollar Sanity.
“It should take about ten minutes to set up,” Bakke said. “More importantly, use it and review it on a monthly basis.”
For example, he says that if you overspent on groceries by $100 in any one month, you need to pare back in other categories by the same amount. Conversely, he adds that if you spent $100 less on entertainment in a month, that surplus should go directly to replenishing your nest egg.
Cut Costs and Liquidate
Sometimes, financial recovery is a game of inches, notes Ryan who says it’s important to scale back on non-essential expenditures and consider selling items you don’t need. “Every little bit helps.”
Double-Up on Contributions
Once you’re back on your feet, Ryan recommends exploring ways to ‘double up’ on your retirement contributions.
“This could mean taking advantage of employer match programs or dedicating bonuses and tax refunds to your retirement savings,” he said.
Start a Side Hustle
“There are literally thousands of ways to generate income in your spare time, and we’re all good at something,” said Bakke. “And even if you only have an hour or so of spare time each day, that can be used to drum up cash. If you can find a hustle that generates $500 worth of income each month (totally not out of the question), you can have $500 in your nest egg after ten months using that strategy alone.”
Jonathan Merry, a finance expert at Moneyzine, suggests looking into online opportunities, adding that many online platforms, including Upwork and Fiverr offer a vast array of freelance tasks.
He said, “From a client’s perspective, I have engaged and invested heavily in hiring professionals ranging from editors and translators to creatives like writers and designers.”
He observes that the freelance marketplace is bustling with potential, presenting daily opportunities as companies are perpetually in recruitment mode.
Set Short- And Long-Term Goals
If your nest egg was at $10k and you lost it all because of an emergency, you’re not going to get that back overnight, Bakke emphasized. “That’s why you need both short-term and long-term goals.”
Maybe one short-term goal is to save $250 in the first month, in order to start off easy, he explains. Then maybe you set a goal of two years to get back to your original $10k.
“And when you hit a short-term goal, celebrate that modestly. That will help you stay motivated and on track.”
Put Your Money to Work
According to Dana Ronald, CEO of Tax Crisis Institute, after a crisis, you should make saving a priority as soon as you can. “Having a well-crafted financial plan is crucial, especially after unexpected setbacks,” said Ronald.
One thing to consider, she notes, is investing in high-yield savings accounts or stocks with growth potential. She said, “While it’s important to balance risk with security, taking smart risks can help boost your savings over time.”
Ronald says to also remember compound interest. “The longer your money has to grow, the more it will earn in interest.”
That said, she believes all of these tips will only mean little if you don’t have a solid budget in place and stick to it. “It may be tempting to dip into your savings again,” she continued, “but remember why you’re rebuilding in the first place.”
Use Practical Tools for Managing Money
Rebuilding savings requires a purpose-driven approach, particularly during periods of uncertainty, said Merry. He suggests leveraging tools and resources designed to bolster savings efforts and manage spending effectively.
“Seek out banking services or apps featuring automated savings derived from expenditures or fixed sums. Certain platforms provide comprehensive views of spending behavior, highlighting potential segments for further savings.”
Avoid Obsessing Over Your Finances Daily
If you’re practicing responsible spending and diligently saving, Merry says your financial cushion will naturally regenerate over time — so there’s no need to worry too much.
“Continuously monitoring your bank balance can lead to unnecessary stress and impulsive financial decisions,” he advised. “Instead, stay calm, approach each day as it comes and trust that your savings will recover gradually.”
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This article originally appeared on GOBankingRates.com: Lose Your Nest Egg Paying for an Emergency? 11 Expert Tips on How To Bounce Back
