Regardless of your age or income level, check this item off your list as soon as possible.

Key points

• You may want to take control of your finances in the New Year.
• Before you do anything else, see what your emergency fund looks like and make a plan to strengthen it if necessary.

The start of a new year is a great time to assess – or reassess – your financial situation. It could mean a lot of things, like reworking your budget or making a plan to get rid of some of your credit card debt. But regardless of your age, how much money you make, or what your existing bills look like, there is one financial move that should trump all the rest in January – making sure your emergency fund is full. .

The importance of a strong emergency fund

The purpose of an emergency fund is to have cash to leverage in the event of a job loss or unforeseen expense that your regular paycheck can’t cover. Without emergency funds, you might be forced to rack up costly debt when bills come in unexpectedly, or when your income drops or disappears altogether.

Ideally, you should have enough money in your savings account to cover three to six months of essential expenses. If you’re not sure which savings goal to aim for, there are calculators you can use to determine your emergency fund amount. But in any case, it’s imperative that you see where your savings stand at the start of the year. If they fail, your main goal should be to boost them as quickly as possible.

How to free up more money for emergency savings

If you’ve taken a look at your emergency fund and you’re not happy with the number you see, then your best bet is to come up with a plan to increase your savings. You can do this in several ways.

First, set a budget if you aren’t already following one, or take a look at your existing budget and try to make some changes. Cutting back on spending could free up a good chunk of money for your savings.

Of course, some expenses are easier to reduce than others. If you’re currently renting an apartment for $ 1,000 a month and you’re halfway through the lease, you might not have much leeway there. But if you typically spend $ 300 a month on hobbies and entertainment, this is one expense category where you can make some changes.

Another option to increase your emergency cash reserves is to find yourself a second job in addition to your principal. Since this money will not be allocated to existing invoices, you can use your ancillary income to supplement your savings.

Likewise, you could get an increase in 2022. If your emergency fund needs some work, a good bet is to set up an automatic transfer so that extra money from your paychecks goes into your savings beforehand. that you don’t have the option to spend it. . Or, to put it another way, if your monthly paycheck gets a boost of $ 200, it pays to have that $ 200 automatically land in your savings.

Your emergency fund might be just the thing to bail you out when life throws a curveball at you. Before making any other financial moves this year, take the time to assess your savings. And if you fail in that regard, make an immediate plan to give your emergency fund the boost it needs.