4 Ways to Quickly Start an Emergency Fund, Even if You’re Broke!
In our last blog post, we talked about how important it is to have an emergency fund set aside for life’s little surprises. Having an emergency fund affords you freedom and peace of mind, which are priceless. Now, let’s take a look at how you can quickly start an emergency fund, even if you are living paycheck to paycheck.
Calculate Your Savings Need
The goal is to have at least 6 months of expenses saved in your emergency fund. Don’t know how much that is? Take a minute and figure it out. Add all of your expenses (housing expenses + car expenses + utilities + gas + groceries + childcare+ any other required expenses) and times that by 6. That number is your goal. Write it down really big and circle it a few times (no really, write it down REALLY big and circle it).
Let’s look at an example:Rent: $1,000Car Payment & Insurance: $350Utilities: $100Cell Phone: $100Gas: $100Groceries: $350Total: $2,000
$2,000 * 6 months = $12,000
You should have at least $12,000 in your emergency fund.
Now take a look at your current savings situation. Do you have enough liquid (cash or easily converted to cash) savings to cover that? If so, kudos to you! If not, you are in the right place! Starting an emergency fund is not as hard as you think.
Open Your Emergency Fund
Many of us have our savings accounts where we have our checking account. Horrible idea. Humans are not very disciplined creatures (or at least I’m not). If you see it, nine times out of ten you will spend it.
For this reason, open your savings account at the most inconvenient bank in the world. Find the bank that your grumpy neighbor works at and open it there (or where an equally repulsive person works). Make it absolutely tortuous for yourself to go there and make a withdrawal. The goal is to put money in easily but never take money out.
You will want to open up a basic bare-bones savings accounts. Most banks have a minimum opening deposit which is typically around $25 so make sure to bring that with you. Also, be prepared to pay a small monthly service fee until you are able to meet the minimum balance threshold. No worries, you will be able to avoid that in no time!
4 Quick Ways to Fund your Emergency Fund
1. Pay Yourself First
The very first check that you write on payday should be to yourself. Before you pay anyone else, you should make a deposit into your savings account.
Before your paycheck drops, figure out how much you can realistically set aside each pay period. Even if you can save just a few dollars each paycheck, it is better than nothing and gets you in the habit of saving.
A little bit adds up quickly. Never underestimate the power of getting into the habit of saving.
2. Cut One Unnecessary Expense
Another quick way to start saving is to cut one expense immediately. Almost all of us have areas where we can cut expenses. It could be your daily Starbucks run, sushi with the girls, a streaming service that you no longer use, etc.
Find just ONE thing that you can eliminate and immediately divert that money into your savings account. For example, say you cancel a subscription, put that money into your savings account asap. Don’t think, just put it in your savings account.
3. No-Spend Month
I never said it was going to be pretty, but I do promise it will be worth it. Another way that you can quickly start an emergency fund is to have a
no-spend month (if you really can’t commit to a month choose a lesser time period like a week two-weeks).
What is a no-spend month? Essentially a no-spend month cuts out all unnecessary expenditures. You can still spend money on necessities but you cut everything else out. Painful? Yes. Effective? Yes.
This is an awesome way to not only jump-start your savings but also to reset your mindset on spending. You really learn the difference between a want and need during this time period. All of the money that you save, put that into your emergency fund.
4. Start a Side Hustle
I am a huge believer that everyone should have more than one source of income. Having more than one source of income gives you disposable income to add to your savings.
There are a ton of resources out there to help you identify what the best side hustle is for you. Everyone that is looking to start a side hustle should read The $100 Startup by Chris Guillebeau. It is an awesome book and walks you through how ANYONE can start a side hustle TODAY.
Now that you know why and how to start an emergency fund, go ahead and start right away! Your future self will thank you.
Leave a comment below. What steps do you plan on taking first? What struggles do you foresee in getting your emergency fund started?
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This is awesome advice, my savings is totally dry after a huge move. It’s good to have some motivation to get something back in my savings account!
Great, I’m glad you found it helpful! Saving money is so tough, especially after moving! But awesome job on having some savings set aside to make that move a little easier for you! Great job!
Tip #3 – I definitely need to apply this immediately! Thanks for the great tips!
Me too! Thank you so much for reading and commenting!
Wow. Um, super amazing picture. 🙂 And of course great tips. The pay yourself first point is very important!
Thank you so much for reading!