Learn how to build an EMERGENCY FUND with these 5 easy steps!
Is your bank account on life support? Is there always more month at the end of your money? If you are living paycheck to paycheck, you’ve probably already realized the importance of an Emergency Fund.
How would you like to be able to have enough money to pay for an unexpected expense without having to whip out a credit card and pay it back over several months or years? How would you feel if you knew you could cover an unexpected expense without borrowing or worrying? How much better would you sleep at night if you had a financial buffer to use in case of an unexpected expense? And let’s face it, these unexpected expenses seem to pop up all too often. If you are one car repair away from disaster, follow these steps to create your own Emergency Fund.
Download your free EMERGENCY FUND planner here to help you get started!
How much money do I need in my Emergency Fund?
$1,000 is a good place to start. This amount will give you a cushion in case of unexpected car repairs, appliance fixes, or doctor bills. Having this money set aside in case of an unexpected expense, you won’t have to run up a credit card or take out a high-interest loan. Later, you’ll want to work on setting up a larger Emergency Fund to cover your monthly expenses for 3-6 months, but first things first. By creating a $1,000 Emergency Fund, you’ll be able to cover an unexpected expense without breaking your budget or going into debt.
$1,000?! I don’t have $10 at the end of the month!
I know what you’re thinking. There’s no way I can save that much! If I could, I would have done it already. But, the sneaky thing about money is that if there’s a little left over, it just sort of disappears. Lunch out with friends, stopping for coffee, swinging through the drive-thru, it all adds up! But, if you focus on this goal, you can do it!
Here are 5 steps to take today to help you save $1,000 for your own Emergency Fund.
Commit to it
Saving up an Emergency Fund can be a struggle, particularly when you’re not used to saving. It’s important to stay motivated. Don’t give up when it feels like you’re not making any progress. Even if you are only able to save small amounts each month, you’re making progress.
Make a promise to yourself that until you have finished saving your first $1,000, you won’t make any unnecessary purchases. Don’t get distracted by shiny things! Stay strong and walk by those 50% off sales. Drive by that coffee place that calls your name every morning on the way to work. Too tired to cook, so you’re tempted to swing by the drive-thru or order delivery? By planning ahead, you can avoid these temptations.
Avoid your favorite stores (including online shopping) until you hit $1,000. Commit to making coffee at home until you have your Emergency Fund saved up. Make a list of easy at-home meals to cook on the nights you’re tired. Even if you stash from frozen meals in the freezer for these times, you’ll save money over fast food or delivery. You can do this! And the faster you’re able to save, the better!
Get Creative
If you don’t have extra money in your budget to put towards an Emergency Fund, you need to start thinking outside the box.
- Are you able to pick up some extra shifts at work?
- Is overtime an option at your job?
- Can you earn some extra cash babysitting, plant sitting, pet sitting, or house sitting?
- Is there anyone who would pay you to do their grocery shopping or errands?
- Can you offer house cleaning services, lawn mowing, or shoveling snow
Look around your house for things you can sell to earn some quick cash. Maybe you have some extra clothes, household items, furniture, or children’s items you could sell.
- Garage Sales can be a great way to get some extra money.
- List items on Craiglist or Facebook Marketplace to earn some extra cash (and declutter! Win/win!)
Put Your Emergency Fund in a Separate Account
Whether you use a separate savings account or just stash the cash in an envelope, keep the money for your Emergency Fund in a different place than your regular checking account. If the money is not easily accessible, you will be less likely to spend it on an impulsive purchase. It will also help you separate the money in your mind, cementing the idea that this is not money you’re using right now.
A separate savings account is usually easy to add to your existing bank account and can be linked to your checking account. You can even set up automatic transfers monthly, so you can set it and forget it. This is a great way to get started saving for your Emergency Fund. It is also a great habit to get into for saving in the future. Paying yourself first is a good habit to get into and I’ll talk more about that in a future post.
Only use your fund for a true EMERGENCY
What is a true EMERGENCY? An EMERGENCY is an unforeseen expense that pops up unexpectedly. It could be when your car breaks down and needs repairs. It could be when your dishwasher breaks down. Your child gets sick and you have an unexpected doctor bill. These are all emergencies that you could use your emergency fund to cover. Remember, it’s usually cheaper to fix something than replace it. So, car repairs, yes! Appliance repairs, yes! Unexpected doctor bills, yes! New boots, no! Not even if they’re 50% off.
Reward your progress with a NO SPEND reward
A great way to stay motivated is to give yourself a reward, as long as you’re not spending any money. Try one of these NO SPEND rewards:
- Call a friend that you haven’t talked to in a while and catch up.
- Take a walk around the neighborhood and get some fresh air.
- Binge-watch a show you’ve been wanting to see.
- Use a visual tracker to celebrate your progress- I love these because it shows my progress and helps to keep me motivated. Get a FREE EMERGENCY FUND TRACKER below!
Remember, even if you’re making slow progress, you’re still making progress. Since an Emergency fund is so important to your financial well-being, I recommend getting to your goal of $1,000 as soon as you can. That way you can sleep better knowing that you are not on the brink of financial disaster when the inevitable unexpected expense occurs.
Every little bit makes a difference, so look for ways to save $5 or $10. Over time, that adds up to your goal. Also, take advantage of any opportunities to earn a few extra dollars. The faster you get to your goal, the sooner you can move on to the next step in securing your financial future.
If you want to track your progress, you can download this FREE visual savings tracker to document your progress. It also includes a planner to help you plan and track your savings.