Do you have money saved up in case you run into an emergency? If not, keep reading for seven ways to build up an emergency fund.
Job loss, natural disasters, car trouble, medical issues, and global pandemics are all considered emergencies.
They can happen to anyone at any time. The purpose of an emergency fund is to have money set aside for these things if they occur.
Emergencies are unexpected, but planning can help you eliminate the financial stress of an emergency.
According to Dave Ramsey, the minimum amount you should save for an emergency fund is $1,000, but that’s not enough in some situations.
Most financial experts recommend having three to six months of expenses in an emergency fund.
Use the following tips to save money and build your emergency fund quickly.
1. Use a separate savings account
The first way to build up an emergency fund is to open a separate savings account.
Get started by taking a look at your current finances. Do you have any money saved up that could be used for an emergency fund?
Is it at least $1,000? If so, put that money into a separate savings account.
If you don’t have at least $1,000, your first step is to open a separate savings account and start saving money for emergencies.
2. Eliminate unnecessary expenses
The second way to build up an emergency fund is to eliminate unnecessary expenses.
Cutting expenses is not fun but it’s a great way to get started building up your emergency fund.
Things like eating out, expensive coffees, and new clothes should be put on hold while funding your emergency fund.
Take any money that you would use on these things and add it to your emergency fund savings account.
3. Cancel subscriptions
Tip number three is to cancel subscriptions.
Subscriptions usually don’t cost that much. The problem starts when paying for multiple subscriptions; it really begins to add up.
To avoid paying for so many subscriptions, find free things to do for entertainment and use free options like YouTube for your workouts until you build your emergency fund.
4. Reduce household expenses
The fourth tip is to reduce household expenses.
Reducing household expenses won’t free up a ton of money, but it will make a difference.
Turn off your lights and unplug devices when they’re not in use.
You also want to avoid cooking and washing clothes during peak hours of the day.
Another thing that you could do is to set your thermostat a bit higher during the day in the summer and a bit lower during the day in the winter.
Use a combination of these things to reduce your household expenses and add money to your emergency fund.
5. Pick up a side hustle
Number five is, pick up a side hustle.
Side hustles are a great way to bring in additional income, and they usually pay pretty quickly.
Driving for Uber, working part-time at a retail store, and doing odd jobs around someone’s house can all be considered side hustles.
Choose a side hustle that interests you and add the money you earn to your emergency fund savings account.
6. Sell things that you don’t need
Tip six is to sell things that you don’t need.
Selling things is a really quick way to add money to your emergency fund.
Have a garage sale or list things that you no longer need on the Facebook marketplace.
There are also online consignment shops like Poshmark or Mercari, where you can list your items online and ship them instead of meeting in person.
Look around your house for things that you don’t use and start selling them today.
7. Add your emergency fund to your budget
The last tip is to add your emergency fund to your budget.
This means add a category in your budget for an emergency fund.
Once that is done, take a look at your current finances to find extra money or money that you can shift around to add to your emergency fund.
Come up with a sustainable amount to contribute to your emergency fund each month, even if it’s only $20.
Any amount that you add to your emergency fund will help you reach your goal faster.
The bottom line
An emergency fund prepares you for the things that will come up.
Being prepared helps you lower your stress levels during the chaos, and it also makes you feel better about your financial future.
Where are you with your emergency fund? Let us know in the comments.