How to save $ 400 per month is a challenge but essential for emergencies

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It’s important to have money set aside for emergencies, but four in ten Americans say they would struggle to find $ 400 at a pinch, according to the Federal Reserve’s annual check on Americans’ financial health .

Without a cash cushion, these resource-strapped consumers risk finding themselves in additional financial hardship when faced with a financial emergency. This is because they told the Fed that they would turn to expensive payday loans to pay for an unforeseen expense, even though these loans can trap borrowers in a cycle of repeated borrowing due to their rates and high fees. Others said they would put emergency expenses on credit cards and pay them off over time, potentially accumulating interest.

But there are other strategies for building a quick savings cushion rather than turning to expensive loans or increasing credit card debt, financial experts note. Some of the tips can be turned into longer term strategies that can help build an even bigger financial foundation over six to 12 months.

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1. Sell things you no longer use

Your attic could turn out to be a treasure house for your bank account. There are sites where you can sell everything from designer clothes to your grandma’s old china. Poshmark, for example, caters to fashionistas selling their second-hand clothes, while eBay stays a watch for everything from antiques to your child’s old Lego toys. Many of these sites charge a selling fee, so be sure to do your research to find the right one for you.

“You can’t take it with you, and we’ve got a lot that we’ve built up over the years,” says Greg McBride, chief financial analyst at Bankrate.com. “Go through the attic, go through the garage and ask, ‘Do you really need this’? “

2. Treat yourself

Don’t overlook the gig economy, which has helped millions of Americans earn extra money or even build a new career. Before embarking on a new gig, check out SideHusl, which reviews the roughly 300 platforms you can earn extra money on. The site provides information on how gig employers work, how much you can earn and the pitfalls to be aware of.

“There are 168 hours in a week, and even though you are currently working 40 hours a week, there is a lot of leeway to devote a few hours to other things, especially if it can put some money in your pocket. “, McBride Notes.

3. Receive a refund and put it in savings

Americans are reaching peak refund season because of the tax filing deadline. Nearly 100 million people are likely to receive a refund from the IRS, which can be put into a savings account for rainy days.

The typical refund is the biggest “paycheck” of the year for more than four of 10 workers, according to a Credit Karma Tax survey. With an average reimbursement approaching $ 3,000, it’s wise to set aside some for rainy days, experts say.

4. Transfer credit card balances

If you are paying interest on a credit card balance, consider a balance transfer card. These cards can free up money by eliminating your monthly interest during the card’s introductory period, which can range from 15 months to 21 months, giving you more time to pay off a balance.

There are, however, a few pitfalls. You will typically pay a balance transfer fee, which often ranges from 3% to 5% of the balance. And they’re often only available to consumers with a good credit score of 700 points or more.

5. Pass the credit card

Pay in cash instead of using plastic, as you’ll probably think twice about making a purchase when dealing with actual invoices. Consumers are more likely to spend more if they don’t use cash, research shows.

“If you know that you will have to spend more than what you currently have for the expenses necessary to make ends meet, you can resort to your credit card,” notes Dana Marineau, financial attorney at Credit Karma. “If you are looking for an alternative, personal loans will often have lower interest rates than credit cards. “

Personal loans such as Marcus from Goldman Sachs offer rates as low as 6.99%, considerably lower than the typical credit card rate of around 17%.

6. Reduce expenses

According to Debt.com, about three in ten Americans say they don’t budget. But it’s never too late to start, and budgeting and tracking your spending can help you determine where you’re overspending or could cut back. Apps like You Need a Budget or Mint can help you track and manage your spending.

Likewise, look for better rates on your insurance plans, including home and auto insurance, recommends McBride of Bankrate.com.

Aimee Picchi is an economics reporter whose work appears in publications such as USA TODAY, CBS News and Consumer Reports. Previously, she had spent nearly a decade covering tech and media for Bloomberg News. You can follow her on Twitter at @aimeepicchi.

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