Funding an Emergency Fund In Three Simple Steps

Fri, Jul 13, 2012

Budgeting, Financial Advice

While starting an emergency fund may be easy, saving money for an emergency fund is much more difficult. Over the past few months, I have been working hard to pay off some of my credit card debt while also contributing to my emergency fund as per Dave Ramsey and many other financial experts’ recommendations. At first my emergency fund felt like a black hole that ate all of my spending money for the month, but over time I have come to realize that it actually serves a purpose.

An emergency fund is all about expecting the unexpected. Medical expenses, car repairs and job loss are just three situations that anyone may encounter at any given time without any warning. If any of these things were to happen to me or my family and I did not have an emergency fund, the expenses would be paid for on credit. Since I am already putting a ton of effort into paying off my current debts, the last thing I want is to add to it. The emergency fund helps protect me from adding to my debt while also gaining a small amount of interest when sitting idle in a savings account.

Through my Internet research I found that it is best to start with a $1000 goal and work up to 3 to 6 months’ of household expenses. This may seem like an unattainable goal (especially when you are already paying down debt and dealing with other expenses) but it was actually pretty simple and relatively easy. Use the following three strategies to free up some extra cash and start saving.

Start a savings account with an automatic deposit

Starting an account for your emergency fund is easy and usually free through most credit unions. If possible, set up the account to automatically pull a small amount of money from a main account periodically (I used my checking since my paychecks are direct deposited there). By making the contributions automatic, you no longer have to think about saving.

Cut down on unnecessary expenses

This may be more difficult for some people than others but with a little effort, anyone can do it. I worked hard to cut down on things like my unlimited cell phone plan and my digital cable and internet service. I didn’t cancel them but instead just had the plans reduced and saved well over $50 a month. Embarrassingly, one of my biggest expenses was for fast food and coffee so cutting down on those definitely helped, although it was one of the harder things for me to do. The money that you are saving each month should also be put towards your emergency fund.

Make extra cash on the weekends

This third tip is all about using your creative side to make some really good money. I searched around the internet and found a bunch of ideas for weekend projects that take minimal time in order to make extra cash. Things like mowing lawns, painting addresses on curbs and holding garage sales are all great ways to make some extra money. However, the idea that worked best for me was recycling old or broken furniture. I saw a short story on the internet about an older lady who bought/found old furniture, restored any flaws and then sold it back for more money and knew that I could do it too. After asking friends and using the “Free Stuff” section of Craigslist I had a garage full of furniture. I used basic tools (belt sander, sandpaper, brushes, stain, screws) and repaired a good portion of the furniture. I sold most of the furniture back on Craigslist but found quite a few people in my neighborhood who were interested in some of the pieces after watching me work on it in the driveway all weekend. Yes, it took some elbow grease but I made just over $400 the first weekend.

I used these three strategies and now have an established emergency fund with close to 6 months of expenses. There are tons of other ways to save money but this is what worked for me. I hope that you can use these ideas to be inspired to start saving for your own emergency fund.

Andrea is a hardworking mother from Texas who is constantly seeking advice and counsel from her friend, a San Antonio bankruptcy attorney, who provided her with most of the ideas for this article.

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