The Ins And Outs Of How To Have A Lucrative Emergency Fund

From the time you got your first job, there's probably a good chance that your heard your parents tell you that you should always have a rainy day fund, which was code at the time for an emergency fund. Because you really never know what's going to happen — from a medical emergency to losing your job — it's good to be prepared with three to six months' worth of living expenses tucked away in a savings account (via Wells Fargo). That's right: according to the experts, your emergency fund should be able to cover you for three to six months should something come up and you find yourself without any incoming cash.

However, considering the majority of people in the U.S. live paycheck to paycheck, being able to put away money is far from easy, per a LendingClub press release. While this doesn't mean it can't be done, it does mean it takes effort and some sacrifices, like not going out to brunch Saturday and Sunday every weekend and realizing that just because something is on sale doesn't mean you have to buy it, no matter how much blue might be your color. Nevertheless, here are some tips that can help you save for emergencies, just in case.

The first step to creating a lucrative emergency fund is taking a hard look at your finances. A good place to start is seeing where you can cut back: Do you need all those cable channels? Isn't Netflix enough? Is it really necessary to get a manicure every other week? When you realize where you can cut back, you should set up a budget of what you make and exactly what your monthly expenses are. Having a budget to look at and monitor will help you see exactly where your money goes and how you can change that for the better (via Consumer).

"A budget is one of the most sure-fire ways to help you achieve financial independence," Erik Marberger, a CPA at PricewaterhouseCoopers, tells Insider. "Budgeting will allow you to save money, avoid overspending, and stretch every dollar. Your budget shouldn't restrict you to eating ramen every night and canceling your Netflix subscription." That is, of course, unless you want to eat ramen every night. (Toss in some veggies and an egg, and you've got a tasty dinner!)

Sometimes when people start saving, they get ahead of themselves. For example, if you make $2,000 a month, trying to put away $500 into savings and pay all your mandatory expenses isn't realistic. Instead, you'll feel defeated when you put that $500 in savings only to have to take it out later in the month to cover utilities. You want to decide on an amount that not only won't make you feel defeated, but that makes you feel comfortable every time you put it in a savings account (via Forbes). This is where the budget you've created comes into play. 

When you have your monthly incoming and outgoing money in front of you, it can make it easier to see that maybe setting the goal of putting $200 away every month is more realistic. If you know that there will be some months where you'll make more or less than other months, you can adjust that $200 accordingly. 

Once you've set a monthly goal, think of long-term, reasonable goals for your savings (via Money Talks News). Do you think you'll be able to have a few thousand in your savings by the end of the year? Or do your income and cutbacks allow you to reach $10,000 by December 31? Having a goal and achieving that goal are going to feel amazing. That's why it's paramount to be realistic about what you can save each month.

If you're the type of person who just isn't good about saving money — and a lot of us aren't — setting up recurring transfers every month is a great option because it immediately removes the temptation to spend when you shouldn't (via CNBC). It's your basic "out of sight, out of mind" mentality.

When it comes to setting up these transfers, you want to seriously consider making sure they go into high-yield savings accounts. A high-yield account is one that earns interest rates far higher than you'd find in a traditional savings account (via CBS News). Although the national average interest rate fluctuates, it's still going to get you more bang for your buck. Granted, you shouldn't expect to find a bank that offers high-yield accounts that will score you $1,000 a year on the $5,000 you put away, but it will be in the double digits, unlike regular savings accounts.

Although you don't want to check your progress every single day, because you're not likely to see any change and that can be disappointing, if you check once a month or once every other month, you'll be able to see that your money is working for you and motivate you to continue (via Clever Girl Finance).

Some people need to see proof that what they're doing is paying off, so to speak, so monitoring your account is a good way to do that. It will give you the opportunity to understand how high-yield accounts work — information you probably want to pocket so you can eventually become a money-saving pro. It's also a good idea to make sure there's no fraudulent behavior on your account (via Computer Weekly). Because if there is, you don't want to wait; you want to remedy that stat. Of course, a responsible bank will pick up on any fraud, but that doesn't mean you should completely leave that to them. It's your money, so you want to be involved with it. 

Yes, you read that correctly: treat yourself when you reach a goal. Naturally, this doesn't mean "Treat Yo Self" à la Tom and Donna on "Parks and Recreation," but you should recognize and celebrate your financial accomplishments (via the Consumer Financial Protection Bureau). It's a big deal to be able to cut corners, stay inside the lines, and have a lucrative — or at least soon-to-be lucrative — emergency fund.

While you're doing all this amazing saving, also keep in mind that money alone won't save you in some situations. Having an emergency savings account may help you sleep better at night and might prevent you from scrambling to make ends meet if a financial issue arises, but contrary to what society has taught us, money isn't solely the answer to all our problems. As long as you maintain that realistic thinking, it will help you from feeling like you've hit a roadblock if you can't save one month here and there. Things happen that are sometimes out of our control, so don't be hard on yourself if a month goes by and you haven't reached your goal. Enjoy the process of savings instead because that's the real success.