How money experts are thinking about emergency savings right now

If there’s one thing nearly every financial expert can agree on, it’s that you need to set aside an emergency fund. But saving six months’ worth of expenses isn’t easy, especially for people who are already living paycheck to paycheck. And it’s a situation that is further exacerbated by the racial disparities in wealth and savings.

Many families have trouble putting away enough money to cover the basic costs of living during an extended period of unemployment — and, thanks to the job losses and furloughs associated with the coronavirus pandemic, many of us have already spent much of what we’ve saved.

How can you save more money each month during a situation in which every day feels like a financial emergency? During a recent appearance on Today With Hoda & Jenna, Suze Orman told viewers to save any stimulus checks, unemployment benefits or tax refund payments they receive, even if it meant putting bills into forbearance, carrying a credit card balance or damaging credit scores. “If your credit score goes down, if something happens, I don’t care. Save your money to get through right now.” You never know when an unexpected expense is going to come up. That’s why it’s imperative to have extra cash on hand by having an emergency funding plan in place.

Do other financial advisors agree with Orman’s advice that you should always have a financial safety net? We reached out to three money experts to learn how they’re thinking about emergency savings right now — and what they suggest you do to protect your finances during this period of extended uncertainty.

Ask yourself three questions

Should you turn your emergency fund into your top priority? Before you make any adjustments to your current financial plan, it’s worth doing a quick evaluation of your savings, expenses and job prospects. Betty Wang, CFP®, founder and president of BW Financial Planning and advisor at the XY Planning Network, suggests asking yourself three questions:

1. Is your job situation stable for the next year?
2. Do you have enough liquid cash (emergency fund) to cover at least 6 months of expenses?
3. Are you comfortable with this amount?

“If you answer yes to all three questions, you can continue on your current debt payment and investing plan,” Wang advises. “If you answer no to one or more of these questions, then you need to consider making savings a priority in the short term.”

Take a deep dive into your spending

If you need to boost your emergency fund fast, the quickest way to get there is by cutting back on your spending. “The best way to start saving money each month is to take a deep dive in your spending weekly,” advises Shannah Compton Game, CFP® and host of the Millennial Money podcast.  “You are looking for ways you can lower or cut out expenses and move that money into your savings account.”

Remember: Cutting back on your spending doesn’t necessarily mean giving up everything that makes life enjoyable. There are ways to make a budget and continue doing what you love. If you order pizza every Friday night, for example, switch to every other Friday — or try different homemade pizza recipes. You can also find big saving wins by reducing your energy use, switching service providers or increasing the deductible on your car insurance.

Know what to prioritize

Managing your money during stressful or uncertain times often comes down to knowing what to prioritize. Rachel Cruze, host of The Rachel Cruze Show and author of Love Your Life, Not Theirs: 7 Money Habits for Living the Life You Want, offers this advice: “Your first priority is the four walls: Food, shelter, utilities, and transportation. Don’t pay on your Mastercard if you’re not putting food on the table. That can wait.”

Game agrees. “If you’re in debt, it’s okay to balance paying off your debt and saving money to create a financial safety net, particularly if you’ve lost your job. I normally suggest finding a split that you can live with, such as an 80/20 split, where 80% of your excess money is going into savings and 20% is going to debt payoff.” This doesn’t apply to minimum payments, of course — you’ll want to keep making those on time to prevent your debts from going to collections. It just means that If you have an extra $100 left over at the end of the month, put $80 in savings and put $20 towards debt.

If you can’t even make the minimum payments on your debts right now, it’s time to make some phone calls. “Mortgage companies, utilities, even credit card companies are giving grace periods [as a response to the coronavirus pandemic],” Cruze reminds us. “Stay as current as you can, but if you’re falling behind, be proactive and make that call.”

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Do what you can with what you have

There’s no one-size-fits-all solution to saving more money each month. Some people may need to download a budgeting app and start socking money away. Other people might want to pick up a side hustle and save the extra income. Financial advice is often more prescriptive than personal — which is why the most important advice our experts can offer is to figure out what you need to do to get your finances where they need to be.

“Do what you can with what you’ve got,” Game says. “If that means focusing on saving money and paying the minimum on your credit cards for a few months, that is still a worthy money move and you can switch back to debt payoff mode once your income is stable again.”

Cruze gave similar advice: “Do not make decisions based on fear. Fear is a terrible financial advisor. What you have to do is look at what you have and budget.”

So take a look at what you have, ask yourself how much money you need to save to cover a potential emergency or protect your family during a period of unemployment, and then do what you can to save more money each month. Even if you don’t make the recommended six-month emergency fund goal, every dollar you save will be ready for you when you need it — and, in a true emergency, you’ll be glad it’s there.