Do you know how you would handle a financial emergency?
Emergency funds are an imperative part of financial wellness. As much as we all would like live without thinking an emergency will happen, failure to prepare can have dire consequences. Uncontrollable situations happen. Being prepared for an emergency will save yourself from financial difficulties or even disaster.
Many millennials see the task of building an emergency fund as daunting. With many young adults having massive student loan debt or a small salary, saving any money can be a challenge.
If you have no emergency fund at all, I suggest starting to save an achievable, but comfortable amount of $1,000. Having even just $1,000 will save you from having to rely on credit cards or loans in case of emergency.
Whether you’re looking to start a fund from scratch or build your current one, here are a few tips on how to build an emergency fund quickly.
Adjust your budget
As we frequently suggest, the first step towards achieving any financial goal is to look at your budget. Create a budget if you don’t have one. If you do budget, check to see how your budgeted spending compares to your actual spending and adjust accordingly.
If you’re really trying to cut back, consider what frugal actions you should implement. Should you use coupons to save on groceries? Can you save on your electric bill by being conservative with your usage? Frugality can be tedious, but effective when you need to save money.
Sell your stuff
Chances are you have a few things laying around that you could sell for some quick cash. Take a few hours to look around and organize your house, and you may be surprised at what you no longer need.
Can you sell toys, tools, workout equipment, clothes, or furniture? If you’re not sure it will sell, allow potential buyers to bid on it instead of listing a price. Take a quality photo, post it on a website like Craigslist or OfferUp, and wait for the offers to come in.
Pick up a second job
Are you able to take on a second job for some extra money? Though most of us wouldn’t love taking on a second job, it can make a huge difference in our finances.
Even if you can only work for a month in a restaurant at night, if you add every cent of that to your emergency fund, you will likely have it half stocked in a very short amount of time.
Not quite ready to commit to a second job? See what odd jobs you can find using your skills.
Whether you choose babysitting, mowing lawns, painting houses, event bartending, or dog sitting, earning a few extra hundred dollars here and there will quickly build your emergency fund.
While you’re at it, consider starting your own side hustle for the future. Extra income earned through side hustles, like blogging, is a great way to pay off debt, add more to savings, and secure your financial future.
Go on a spending freeze
If your budget is still not quite as trimmed down as it could be, why not consider going on a spending freeze for a short amount of time?
A spending freeze is a time spent without buying any extras – no coffee, no shopping, and no eating out.
You will be surprised by how much you save, and you’ll also be astonished to see how much you can probably cut back in these areas in your regular budget.
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By setting a timeline and a savings goal, you will be able to build an emergency fund quickly. Once you have an emergency fund, you can rest a little easier knowing that you are prepared and then can shift your focus to paying off debt or saving money.
What will you do to build your emergency fund? If you already have one, how did you build yours?
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When I initially built up my emergency fund, it helped to have a second retail job. I would put a majority of the extra income directly in to my savings account.
Now, I find that cutting expenses works a bit better for me. Depending on the expense, it is not as much of a life change. For example, I cut cable from my budget in March and it has helped to save about $60 per month. Although it doesn’t seem like much, it has been over $400 thus far.
Great idea on working the second job! Cutting $50 here and earning a few dollars more every month can build an emergency fund more quickly than you would believe!
Great post, Rachel!
I wish I’d known about the emergency fund when I was younger. Sure glad I learned in my later years.
This year ours has taken a hit. Both of our 12-year-old vehicles had to have new transmissions, and my wife’s car had to have new tires.
On top of that I had some medical expenses. Luckily, we were expecting those.
You have some great ideas on how to money away, and I HIGHLY recommend that folks do so.
Keep the great ideas coming!
Thanks! Major expenses like that are never fun, but aren’t you glad you saved for them ahead of time? :)
Picking up a side hustle is a great way to build up your emergency fund because, if you’re paying all your bills with your regular day job, you can save 100% of your side hustle income. Your emergency fund will really build up fast if you are saving all of your side hustle income.
I’d just remind people that if you’re saving your side hustle income, you’ll have to get ready to pay taxes on it (which is another reason why it’s good to save 100% of your side hustle income in order to avoid unexpected tax hits).
Can’t forget about Uncle Sam! Side hustling has allowed me to save so much more than I would be able to if I just relied on my full-time job. Even making $100 extra a month adds A LOT to savings!
I sold a bunch of stuff that I no longer used and then started picking up extra hours at work and quit eating out so much. The not eating out and extra hours helped tremendously. :)
Totally agree with this post, I used most of all my emergency fund this summer for unexpected bills ( a lot of car repairs) however I tend to have side hustle jobs to save more quickly(dog sitting work in a cafe during weekends from the end of September until June), have periodically sort of shopping ban I have budgeting day once per week (with a lot of mess papers and headaches:P)….since I understood the importance to have a budget I understood the importance to have savings and emergency fund too!!!
Hi Rachel,
Nice post highlighting the importance of emergency funds and also practical set of ideas that can be used to build it up.
I used to automate saving a small amount of money from my paycheck directly into a separate savings account. This helped me build it up effectively. This was well over a decade back. This method still works.
You could augment with apps like Digit to accelerate saving money towards building up emergency funds.
–Michael
Selling things was one of the ways that I was able to build my emergency fund. It’s amazing what people will buy.