It’s no secret that since the recession hit, the financial situations of many Americans has been deteriorating. Not too long ago, finding a job was not that big of an issue. Now, according to the Division of Labor Force Statistics, it takes many Americans more than 12 months to find a replacement for their lost job. As a rule of thumb, it takes 1 month per every $10,000 of your lost salary. If you were earning $30,000 in your previous job, it will most likely take you close to 3 months to find another job.

Since many who lost their jobs had no “safety net” in terms of savings, too many had to resort to credit and cashing in their retirement accounts (with a hefty penalty, I must add) in order to make ends meet. As a matter of fact, two thirds of Americans who lost their jobs are tapping into their retirement funds in order to find some immediate financial relief; that’s according to the recent study by Transamerica Center for Retirement Studies.

Life happens, job loss happens, health-related emergencies happen. It’s not a matter of IF, it’s just a matter of WHEN. So how can you start preparing a safety net in order to be able to respond to life’s unexpected turns?

After building your initial $1000 emergency fund, your next step should be to live on your last month’s income, which means, having one full month of living expenses set aside.

For those of you who have never been good at saving, living on last month’s income may seem like an unachievable task. Let me assure you, it’s not only achievable, but depending on how disciplined you decide to be for a season, you may be able to reach this goal sooner than you think. So let’s get you started on building your 30-day financial buffer.

Why a 30-day buffer?

The main reason for having 30-days of living expenses set aside is to limit your chances of falling back on credit in case something were to happen. Knowing that you have a full month of expenses to tap into will also give you much needed clarity of mind while considering job replacement options. Instead of making rush emotional decisions based on fear and uncertainty, you’ll have that financial margin to pause, take a step back, seek wise counsel and then decide what your next step should be.

Expense Side of the Equation

The most obvious place we’ll consider when building your 30-day fund is your expense category. More often than not, it’s not how much money you bring in, but how you manage what you earn that makes the difference.

Housing is most likely your biggest budget expense. Here are few ideas on what you can consider in this category in order to make room for the 30-day fund:

  • Requote your home insurance policy with various providers and see if you can get a cheaper rate. If your home insurance and car insurance are covered by different insurance companies, bringing those two under one roof will most likely save you a good bit of money. Take that difference and set it aside in your 30-day fund.
     
  • Do you have a basement? You can turn your unused or extra space into a rental, which will give you additional income that you can purpose toward your savings. If you opt to rent out part of your home, make sure that you set a portion of your funds toward necessary home repairs (in case something were to break in your tenant’s space) and a portion can go towards savings.
     
  • Are you paying someone to do your landscaping or hulling away your trash? Start performing those duties yourself, and every time you’d pay the provider, simply pay yourself and put that money into your 30-day fund.

Transportation is normally the second highest expense; so let’s take a look at ways we can curb that cost and help build your 30-day fund.