Starting an emergency fund is an important step on your financial freedom journey. By having an emergency fund, you can protect yourself from unexpected expenses. These can include job loss, medical bills, and car repairs. Here’s how you can start an emergency fund:
Set a Goal:
Decide how much you want to have saved in your emergency fund. If you follow Dave Ramsey, he suggests 1K. I started off with 1K as well. And overtime I continued to add small amounts from our paychecks. A good rule of thumb is to have at least three to six months’ worth of essential expenses saved. But you can do this overtime. Don’t let those big numbers scare you.
Start Saving:
Now the fun part, let’s start saving. Decide if you would like to save your Emergency Fund in a cash envelope or online savings account. There’s no right or wrong answer. My family and I did a mixture of both when we started. I used Savings Challenges. I would put the cash in an envelope. But I also had $25 coming out of my bi-weekly paycheck. Doing both quickly got us to the 1K Emergency Fund. If you’re not sure yet, just start by putting aside $20 each pay period just to get yourself started. Then gradually increase the amount as you can.
How to Build your Emergency Fund
- Take on a side hustle
- Automate your savings
- Use coupons and Reward Apps
- Cut back on Spending
- Eat out once a week and cook the remainder of the week.
- Cancel Subscriptions
- Save your Work Bonus and Tax Refund
- Use Savings Challenges
Set aside a portion of your income each month. Doing so for your emergency fund can help you avoid going into debt any further. This is especially helpful when a financial situation occurs. By following these tips, you’ll be well on your way to having a well-funded emergency fund. This will give you and your family peace of mind.