Top Tips to Build an Emergency Fund FAST
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The thought to build an emergency fund is critical for financial security and, more importantly, peace of mind. Many Americans admit to being kept up at night, losing focus at work, and even struggling with anxiety because of financial stressors at home. If you’re one of them, I hope I can help you find peace in building your emergency fund – even if you don’t have loads of extra money just sitting around.
Building an emergency fund is a great idea. It’s basically just money that you save for when life throws you a curveball, like the loss of your job or medical expenses. If you don’t have one already, building an emergency fund can be difficult and take time. In this blog post, we provide some tips to build your emergency fund quickly so that it’s always there when you need it!
Why You Need An Emergency Fund
Many Americans today don’t have a savings account or emergency fund. I heard on the news recently that the Commerce Department reported that Americans spend all the money they have and personal savings rates have reached the lowest level since the Great Depression.
Your emergency fund is your safety net: in case you get sick or lose your job you can use your emergency savings to hold you for a few months until you can find a new job.
Your emergency account should be separate from your checking or savings accounts and should only be used for emergencies such as unexpected expenses, unemployment, medical bills, etc.
An emergency fund should be enough savings to pay your bills for at least 3 to 6 months. Money for an emergency fund should be readily accessible and stored in a checking or savings account, preferably a high-interest savings account, such as Emigrant Direct or ING, or a money market account where you can make money while saving money.
To determine how much money is needed to pay 3 to 6 month’s worth of your bills do an inventory and write down all your bills and expenses and the monthly amount spent for each. Calculate the total. Use this amount and multiple by 3 or 6 to determine the total amount you need to save in your emergency fund.
Make sure you do some comparison shopping before opening an account for your emergency fund to ensure that there are no minimum or other fees for accessing your account.
You can start off by contributing small amounts to your emergency fund until you are able to contribute more. Start off with a contribution of at least $20 a month to your emergency fund. Once you are able to contribute more to the fund do so. Make several short-term goals for your emergency fund. Once you have saved enough money to pay one bill, pat yourself on the back. Then keep saving until you have enough to pay three bills and so on, until you have enough saved to pay your bills and expenses for 3 to 6 months.
Once you have reached your emergency fund goal, it is time to start developing some long-term goals such as an additional savings account and to start planning for retirement.
Having an emergency fund will ensure that you are on the road to becoming financially secure and will prevent you from going into debt when an unexpected tragedy happens or unexpected expenses arises. An emergency fund is the first step to getting out of and staying out of debt.
3 Steps to Build Your Emergency Fund FAST
In the financial world, everyone talks about getting out of debt, buying a house, and building an emergency fund. Whether your emergency fund is a “baby” fund at $1,000 (the bare minimum), or looks more like $10,000, evaluating where you’re at and setting goals will help you achieve them much faster.
Evaluate where you’re at
You can’t move forward and build an emergency fund unless you know where the starting line is. The baseline is where you’re at right now, with everything else being UP from here. Start with an evaluation, and be honest with yourself. If you’re spending way too much money on fast food or makeup, don’t beat yourself up over it – just fix it.
To do a thorough evaluation, check your bank account, Paypal, Cash App, etc. This includes prepaid debit cards or any other accounts you may stash and spend money from.
How’s your money situation? Is your income higher than your expenses? How much extra do you have each week or each month? Write all these numbers down, as they’re equally important in figuring out where you’re at, and fixing the leaks. We’ll talk about that in a moment.
I like to print off my bank statements and go through everything line by line to see where my money is going. You can print 1, 3, 6, or even 12 months off at a time. It all depends on how in-depth you want this financial audit to be.
To build an emergency fund you need to Fix the leaks
After I’ve printed off my bank statements, I go through and highlight necessary expenses in one color, and unnecessary expenses in another color. This is an easy way to see what’s going on at a glance. I like to call unnecessary expenses “leaks”. If you want your boat in tip-top shape, you must repair all the leaks!
How often did you purchase fast food? How expensive was your last date night? How many last-minute grocery trips did you take because you didn’t have a meal plan? How many times did you buy a soda or snacks from the gas station? How many coffee runs did you make?
Everyone has their own budget leaks, so take some time to sit down and figure out what yours are. While going through your bank statements, the leaks will usually become clear pretty quickly! Many of us have expenses each week, or even every few days, that we don’t consciously take into account when evaluating our financial situation. These are the most dangerous leaks because we don’t even realize we have them!
Fixing the leaks is a must, no matter how much money you make – or how tiny the leaks may seem at first. If you add up all the “little” leaks over a 6 or 12-month period, you’re going to notice your boat is sinking much faster than you may have realized. Either way, the leaks need to be patched, right? Small or large, they’ll still cause problems.
You don’t have to go from 100 all the way down to 0 overnight. What I mean is, if you’re used to a coffee run every morning, you don’t have to quit cold turkey. Buy coffee to make at home and see how close you can get it to what you’re used to. Then, start cutting back.
You may realize you like the coffee you make at home even more than the stuff you get at the coffee shop. I know when I cut back on coffee runs, I loved that I could make it at home and choose my favorite brand of syrups. Plus, plant milk is an additional $.60 when I get it added to my coffee at Starbucks. At home, I can have a gallon of it and it’ll last forever! 🙂
Next, we will talk a little about adding income to your budget. Even if you make a large salary, you’ll need to fix the leaks to find extra money to build that emergency fund.
Make more money
Building an emergency fund comes down to a simple principle: more money in, less money out. If your income isn’t already covering your bills with some leftover to add to your emergency fund, changes need to be made. The good news is, these changes aren’t painful. The bad news? You’re not going to build your emergency fund overnight.
There are hundreds of ways to make extra money to build your emergency fund faster. Whether you start a blog as a semi-passive long-term income stream, or you deliver for UberEats after your 9 to 5 job, the amount of extra income you can earn from a side hustle is endless.
Even if you can cut expenses, most likely you’ll still need more income. YouTube is a wealth of information, complete with full videos (all for free!) about how people just like you and me became millionaires because of their side hustles. While the millionaire life isn’t everyone’s goal, you can easily make an extra thousand dollars a month (or more!) with side hustles.
The next steps to build an emergency fund
No matter how intense you are with fixing your financial leaks or making more money with a side hustle, your journey is your own and you shouldn’t feel bad about any setbacks. Life happens, things get in the way, and paying off debt can be painstakingly slow. However, you’re on the right path and you CAN do this! Keep reminding yourself of that! Negative self-talk can set you back even more, so keep it positive.
Leave me a comment and let me know what your emergency fund plan is! I’d love to hear it.
Other money saving articles you may find helpful if you liked build an emergency fund:
- Bad Ways To Save Money Like Feeding a Family of 6 For a Buck
- The Crazy-Easy Guide To Pay Off Debt Fast
- How to Save Money Grocery Shopping
- How to Save Money on Electric Bill and Other Utilities
- How to Save Money Camping
- 10 Ways to Save Money with Receipts
- The Best Ways to Save Money On Clothes
- Save Money on Food by Shopping Online in Bulk
- Don’t Let Delinquent Debt Ruin Your Finances – with free printable!
- 7 Frugal Living Tips to Save Money NOW