5 Easy Steps to Start and Grow Your Emergency Fund

 

 

 

This week's Question:

Is there any point

to an emergency fund?

 

Yes.

Your emergency fund acts like a safety net.

It is there to catch you when you

fall financially. How might you fall?

The ways are many,

but this is a short list below.

 

 

What things require an emergency fund?

Medical emergency

Car repair

Loss of job

Surprise legal fee

Death in the family requires travel

Broken appliance

Digital destruction

Shocking cellphone replacement

 

 

 

Step 1:  What happens

without

an emergency fund?

 

 

Emergencies wait for no one.

Emergencies expect to be paid for promptly, right?

So, what do you do?

 

Grab money from any sources you can.

Fast.

Sometimes, without considering the consequences.

 

 

Borrow from family or friends. Loans.

Credit cards.

Buy now, pay later.

4-easy-payments.

Finance through the retail outlet.

 

Unfortunately, there are costs associated

with most, if not all these options.

The only way to save yourself from these

unwanted costs

is to begin your emergency fund today.

 

 

Step 2:  How do I start

my emergency fund?

 

 

This depends on your situation.

However, this is where I would suggest

that you be as aggressive as you can

to begin saving for your emergency fund. Why?

 

Because emergencies

are surprises and you need

to be prepared.

So, let’s dive in, shall we?

 

 

Round up to the nearest $1, $5, $10, or $20.

You can do this in several ways.

 

This may happen in the budgeting stage.

For example, let’s say you are

going clothes shopping.

Cap your spending limit at $100.

Then, purposely shop the sales racks.

Or, go online before you shop, so you know

the approximate cost(s) of the items you are buying.

Then, limit yourself and your purchases

to somewhere between $80 and $90.

Then put the remaining balance in your emergency fund.

 

 

Another possibility may be to reduce the amount of cash

you allow yourself for pocket money.

For example, you may be accustomed to having

$50 cash on hand.

Before you go anywhere, remove $10 from that amount

and deposit it into your emergency fund.

Be creative.

Your future depends on it.

 

 

Step 3:  How do I grow

my emergency fund?

How to Add to Your Emergency Fund:

Birthday cash.

Set up an automatic transfer from

checking to the savings account that holds

your emergency fund.

Be sure to treat this as a recurring “expense”

each month as you budget your money.

 

 

Quit a subscription (or two).

Make it a family decision.

 

 

Toss in your next tax refund, work bonus,

or other unexpected cash.

 

 

Shop around for a

better rate on your auto insurance,

house insurance,

internet service,

or phone service.

Take the amount you save

each month

and add that to your emergency fund.

 

 

Get a side hustle

and use that income

after taxes

as a regular contribution

to your emergency fund.

 

 

 

Step 4:  How big

should my emergency fund be?

 

 

You might base this on your paycheck.

Can you go one week without a paycheck?

If your answer is no, then you could start there.

Save enough money so that you get by without one paycheck.

 

 

Then move onto two paychecks.

And three.

Then aim to get a month’s worth

of paychecks ahead.

As you are able,

increase this to 6 months’ worth of paychecks.

This is like saying

that you can go without a paycheck

for 6 months and still get by.

 

 

 

Ideally, you would want to be able to

go anywhere from

6 months to one year

without a paycheck

and know that

you can pay all your bills timely.

 

 

Feel free to use any amount you wish,

just ensure that you

use this money for

emergencies only.

Nothing else.

 

 

Step 5:  How do I

protect

my emergency fund?

 Know what is not

an

emergency

 AND

Do not allow get disappointed over the dollar

amount in your emergency fund.

Remember, that even $500

or $1,000

can help when you need it.

 

 

Ensure that all family members know

what does and does not constitute an emergency.

This does not mean you cannot have fun.

It simply means that

to do these things,

you need to first

bring in the money

to cover the cost

of the things you want to do.

 

 

Therefore, the listed items below

are definite

non-emergencies:

 

Vacations

Parties

Concert or Event tickets

Spa Day

Getting nails done

Shopping trips

Date nights

Babysitter fees

Going out to eat

 

 

Think of this way.

These are all things that you can include

in your monthly

household budget

IF you can afford them.

If not, then find a way to bring in the money

to make these kinds of things happen.

 

 

Remember the Goal:

Setting up an

Emergency Fund

 

 

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