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15 Tips to Help You Build an Emergency Fund and Prepare for the Unexpected

Mar 18, 2024

As we all know, life can be unpredictable, and sometimes, the unexpected can take us by surprise. This is why it’s important to always be prepared for the worst and have an emergency fund in place. 

An emergency fund is a financial reserve that can be used to cover any unexpected expenses, such as medical bills, car repairs, or home repairs. It’s important to have one in place so that you can be better equipped to handle life’s curveballs. 

15 Tips to Help You Build an Emergency Fund and Prepare for the Unexpected

The amount you should set aside for an emergency fund depends on various factors, including your monthly expenses, income stability, job security, family size, and any specific financial obligations or risks you may have. However, a general guideline is to aim for having three to six months’ worth of living expenses saved in your emergency fund.

So, if you’re looking to start building an emergency fund, here are 15 tips that can help you get started: 

1. Set Emergency Fund Goal: 

Decide how much you want to save in your emergency fund for each budget category and give yourself a timeline to reach your goals. If saving three to six months’ worth of expenses seems daunting, start with a smaller goal, such as one month’s expenses, and slowly increase it over time. Saving in small amounts during a set period makes the savings more manageable and gives you a sense of accomplishment when you see your savings growing.

2. Create a Budget: 

Create a budget that allows you to contribute a certain amount each month to your emergency fund. The goal is to make sure that you include the contribution for each category in your budget. That will help you stay consistent and keep you on track to meet your fund savings goals.

3. Automate: 

Set up an automatic transfer from your checking account to your savings account every month.  This is the easiest way so you won’t forget to save. But before automating your emergency fund savings, make sure that the category is also included in your budget – that way your budget will be consistent and will always be accurate.

4. Live Frugally: 

Make cuts to your expenses so that you can put more money toward your emergency fund. Living frugally doesn’t mean you are cutting everything out of your life, it merely means not spending the money you don’t have and thinking about purchases you don’t need.

5. Cut Unnecessary Expenses: 

Take a look at your expenses and get rid of anything that isn’t essential. From streaming services you don’t watch, subscriptions you are paying for that you don’t use, to that extra morning latte you really could make at home instead of buying – you will be surprised how fast unnecessary expenses add up that you could be applying towards your emergency fund.

6. Earn Extra Money: 

Look for ways to earn extra money on the side, such as through freelance work, side hustles, or selling items online. Any extra money you can make you can apply towards your emergency fund to help you reach your goals faster.

7. Reduce Debt: 

Pay off your debt, if possible – so that you can free up more money for your emergency fund. This is one of the best ways to free up your money.

8. Take Advantage of Windfalls: 

This is unexpected money you forgot about or didn’t have access to until a certain time. If you get a bonus at work or a tax refund, use it to add to your emergency fund. If you are trying to pay off debt when you receive this windfall, set aside a certain amount for your emergency fund before throwing any money into debt repayment. There is a psychological effect knowing that all your money is not gone into debt and that you are building your savings.

9. Utilize Technology: 

Use apps to help you track your progress and stay on top of your budget. Also, use apps to help you earn some cash back or incentives. Technology can help you stay on track but it can also help you earn some money.

One of the apps I use and like is the ReceiptJar app – this app allows me to upload my receipts to earn points that I can redeem for gift cards to places I already shop.

When you sign up use code FABIK6CQY to start earning some points!

15 Tips to Help You Build an Emergency Fund and Prepare for the Unexpected

10. Talk About It: 

Securing your financial future and creating savings is not taboo. Let your family and friends know that you’re trying to achieve a personal financial goal to build an emergency fund so that they can support and respect your decisions and help you avoid unnecessary spending.

Just note that not everyone will understand your journey – your financial journey is yours alone to navigate – but you don’t need to feel pressured into spending money you can’t afford to please others.

11. Stay Motivated: 

When saving for an emergency fund sometimes can feel like it takes forever to achieve your goals – you may even have some setbacks during the process. But don’t get discouraged – make sure that when you achieve your goal you celebrate the small successes and stay focused and motivated on your financial journey.

12. Have a Backup Plan: 

Sometimes things happen and having a backup plan is important. So make sure you have some type of plan in place in case your emergency fund isn’t enough. 

No, don’t depend on a credit card to cover your financial emergencies because that will bring you right back into debt – and thats not what you want.

Here is a guide to help you establish a backup plan:

Assess the Situation:

Understand the nature and extent of the emergency. Determine how much additional funding you need beyond your emergency fund.

Prioritize Expenses:

Identify essential expenses such as housing, utilities, food, and medical costs. Prioritize these expenses to ensure they are covered first.

Review Available Resources:

Look into selling anything that is not essential or can be replaced later.

Check if you have any investments or savings accounts that can be accessed without penalties – use this as your last resort.

Cut Discretionary Spending:

Temporarily reduce non-essential expenses such as dining out, entertainment, subscriptions, etc. Redirect these funds towards covering urgent needs. Remember that every penny counts when you are focused on achieving your goals.

Explore Additional Income Sources:

Take on part-time work or freelance gigs if possible.

Sell items you no longer need or use.

Explore online platforms for gig work or selling handmade goods.

Communication is key:

Inquire about a short-term payment plan – make sure you don’t incur additional costs, if necessary.

Explain your situation honestly and seek any available assistance programs.

Seek Financial Assistance:

Look into government assistance programs or charitable organizations that provide aid for specific emergencies.

Check if you qualify for unemployment benefits or other forms of social assistance.

Consider Alternative Housing or Transportation Options:

If housing or transportation costs are an issue, explore alternatives such as temporary rentals, staying with family or friends, carpooling, or using public transportation.

Evaluate Insurance Coverage:

Review your insurance policies to see if they cover any aspects of the emergency. This could include health insurance, homeowner’s or renter’s insurance, auto insurance, etc.

Create a Long-Term Plan:

Once the immediate crisis is under control, focus on rebuilding your emergency fund and improving your financial stability for the future. This might involve increasing your savings amount, investing in income-generating assets (when you have the funds available), or seeking financial education to better manage your finances.

Remember, it’s essential to stay calm and focused during emergencies. Having a backup plan in place can provide a sense of security and help you navigate through challenging times more effectively.

13. Be Realistic: 

Being realistic with yourself is a priority. Only you know your financial situation and only you can control the outcome. So don’t set unrealistic expectations for yourself or your emergency fund – make sure you have everything you can think of written down and accounted for to avoid any issues in the future. Being proactive and realistic will only benefit you. 

14. Invest Wisely: 

Don’t gamble with your money – be smart and wise about how you want your money to grow. If you have extra money, consider investing it to grow your emergency fund. But keep in mind that an emergency fund is for exactly that, EMERGENCY – so make sure that whatever you plan on investing in you can have quick access to your money to cover any financial emergency you may have.

15. Revisit Your Plan: 

Make sure to review your emergency fund plan every year to make sure it’s still working for you.  Life changes and sometimes adjustments are needed – so be sure to review your financial situation and adjust accordingly.

Having an emergency fund will help you prepare for the unexpected – so make it a priority on your budget to ensure you are securing your future and not going into debt when the rainy day arrives.

The Budget Academy
Fab Kellum author of the Girl, Get Out of Debt! blog

Hey you! Welcome to The Budget Academy. I am Fab, a survivor, a mom, and an entrepreneur at heart. Just like many, I have overcome financial struggles and I want to share with you how I did it.  I have a background in Finance and Real Estate and I’m passionate about helping others succeed and achieve financial freedom.  So, don’t be shy, let’s connect and start this journey together! Learn more about me here.