If you aren’t happy with where you currently are in your career or life one of the best things you can do financially is to save an escape fund. If you are going to live each day like it is your last then you will need an escape fund to live off of for a bit while you re-focus your life. How do you save up an escape fund when you already are living on a tight budget? Below I’ll lay out four important steps to save an escape fund to quit your job.
Pay Yourself First
Before your paycheck hits your checking account or wallet make sure you save money for your escape fund. The best way to do this is to set up a separate savings account just for your escape fund. Determine how much you want to save out of each paycheck and before you even think about spending it put it into your specific savings account and don’t touch it until your escape.
Instead of having to transfer the money manually into your escape fund every month, make the transfer automatic. One way to do this is to set up your direct deposit through your work to transfer a specific dollar amount directly to that account. Employers can set up your direct deposit to go to multiple accounts as long as you have all of the proper routing and account numbers to give them.
Some banks, such as ING Direct, allow you set up scheduled transfers. You can tell your bank to transfer the dollar amount once every two weeks from checking to savings. This way you won’t have to remember to do it, change your mind or find another use for the money.
Pick a Target Amount
While it isn’t easy to pick an amount that you should be saving for an escape fund, try to figure it out. Determine how much you normally spend in a month now by tracking your spending. You may be able to eliminate some of the money you spend now on a wardrobe or your commute, but I’d recommend saving more than you think you need. Also decide how many months worth of living expenses you would like to save up as a cushion.
Set an Escape Date
One tactic that is extremely helpful for reaching savings goal is have a date that you want the money saved by. Once you have that date set you can determine how much you should be saving each paycheck or month to reach your goal.
By determining the date you will also be more motivated to reach your goal by the deadline. The target date will always be on your mind when you pull out your wallet to spend money needlessly.
Focus on stopping impulse spending. Practice frugality. Find ways to save money on food. Hack your wallet to reduce spending. Do whatever you can to reach that target savings amount and then we you reach it, quit your job and live the life you deserve to be living.
Are you saving up an escape fund? What tactics and strategies have you used to reach your savings goal?