Steps to Starting an Emergency Fund

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According to a recent survey by GoBankingRates, 62% of Americans have less than $1000 in Savings.  That translates into not being able to handle a financial emergency without borrowing money from family/friends, using credit/payday loans or even worse.  That is where an emergency fund comes in handy.

I understand.  It is difficult to save an emergency fund for anyone but especially millennials.  Between low wages, student loan payments and high rent costs, it can be extremely hard.  I am here to let you know you can start an emergency fund.  Even if it means initially saving $500, then $1000, until you get to 3-6 months of your net income.

Now that you know you need an emergency fund from 5 Reasons you Need an Emergency Fund let’s talk about how you will save that money!

Steps to Starting an Emergency Fund

Decrease Expenses

Decreasing expenses is the easiest way to increase savings!  If you aren’t sure where to start to decrease your expenses, check out the last week’s post regarding 6 Bills you Need to Negotiate.    Without making an extreme sacrifice, you can negotiate a variety of your bills and contribute the additional resources toward your emergency fund.  Personally, I regularly negotiate my car insurance, home insurance, cable/satellite television bills.

Also, have you thought about your current expenses that you don’t really need?  You know, that Apple Music, Hulu, Netflix or even cable television that you rarely watch or listen to.  Personally, I cut my cable!  If you had of told me 6 months ago, that I would no longer have cable I would’ve looked at you like you were crazy.  However, I realized that I never watch live television, most shows are available on the internet, and most importantly cable takes away from my productivity!

Related: 10 Items you Should Slash from your Budget


Increase Income

Although more difficult than decreasing expenses, increasing income is another great way to save toward your emergency fund.  Does your job allow you to pick up extra hours?  Have you considered driving for Lyft or Uber?  Or is there a promotion at your current company that you can apply for?  Any of those methods can contribute to an increased income.  Be sure to save that increase instead of spending it.

Personally, when I was initially trying to pay down debt and save money I picked up a second job at DSW!  What I thought would be a short-term solution to paying down debt ended up being fun.  I stayed at the second job for almost 3 years.  After paying down debt and saving for my emergency fund, I used the additional cash to travel with a fuel my spending habit.

Related: 10+ Online Side Hustles to Make Extra Cash Quickly

Save Irregular Income

I know you are thinking what irregular income?  Irregular income can take many forms like that tax refund you just received or the annual bonus you get from work.  Another source of “irregular income” can be through selling your gently used belongings on eBay or Offerup.  For example, whenever I upgrade my cell phone, I sell my previous cell phone.  Right now I am in the process of moving, so I have listed my dining room table and chairs to sell. Do you have things around your house that would be a treasure to someone else?  If so, the proceeds of that sale can go towards your savings account.

Related: 10 Unique Ways to Make $250 This Month


Automate Savings

Now that you have committed to saving for an emergency fund it is time to automate your savings.  Automation helps because you are no longer tempted to spend the money.  Apps like Qapital and Acorns are great ways to automate your savings.  Start with a small amount like $25 or $50 a month.  Over time, those smaller amounts will add up!  Once you realize saving $25 doesn’t affect your budget much, you can increase the amount that is automatically deposited in your savings account.  In addition, part of your yearly raise can also go into your savings account.

Related: Qapital: Making Saving Fun! and Acorns: Start Investing your Spare Change


Bonus Tip, Slow, and Steady Wins the Race

Ultimately, saving an emergency fund is a marathon and not a sprint.  An emergency fund is typically 3-6 months of expenses.  Don’t let that large amount scare you!  Start with a smaller goal like $500 or $1000 and work your way up to 3-6 months of expense.

Steps to Starting an Emergency Fund

What works best for you when contributing to your emergency fund?

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How to Start an emergency fund when money is tight


  1. This is some excellent advice. I always say Im going to save my blog money,… I’m going to try, everyone needs an emergency fund!

  2. I don’t have an emergency fund at all. These are great tips for saving though. I just started using the app Digit.

    1. Awesome that you started using Digit! That’s one of the better automated money management apps. How’s it going so far?

  3. Great tips. Any outside income I save, and I also have an Automatic Savings Plan set up for myself and my Godson. That way I don’t even miss the money coming out.

  4. These are easy practical ways to stash away a lil bit of cash every month. Cutting back on expenses seems to be a big one for me.

  5. Emergency funds are not a reality for many people who are just trying to get by. It wasn’t until I moved abroad that I was able to adequately save money, and have a rainy day fund. I pray I never need to use it.

    1. I agree that emergency funds can be tough to start but they are def a necessity. Small sacrifices can add up over time.

  6. These are great tips! I need to start doing better with the savings. Id really like to start saving more than we do already but its so hard.

  7. Saving bonus/irregular income works best for me. I have gone thru and cut expenses where I could like XM radio in my car.

  8. Great steps. It is always important to have money in case. You never know what may end up happening.

  9. We started automating our savings and it has been amazing. I don’t think I could go back to flying by the seat of my financial pants. Too scary after 40… 🙂

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