According to financial expert Dave Ramsey, the first step to financial health is to save an emergency fund of a thousand dollars. Then build that emergency fund up even more as time progresses.
You may be wondering how to put aside just the initial emergency fund, let alone even more, in your current financial state.
It can certainly be frustrating to save up money when expenses always seem to pop up when you least expect it, but that’s the whole point of an emergency fund.
These savings will help you stay on a steady financial course, even when disaster strikes, instead of going deeper into debt.
Automate Your Savings
If you wait until the end of the week to save money, you won’t have any left to save. It seems to be a law of money in the hand; if you have it, you will spend it.
To ensure that you are successful at putting some of your income aside each week to save for an emergency fund, you need to make it automatic.
This can be done in two different ways. Either make a separate savings account and set up automatic payments toward it or have your check split into two direct deposit accounts.
Figure out how much you can safely contribute to savings from each paycheck without putting you under your weekly expense needs. Then have this amount directly deposited from your paycheck into a separate savings account.
Find Extra Income Opportunities
If you have the opportunity to make a little money on the side, why not take it?
No matter how small, this extra cash can add up in the long run and help you save up your emergency fund goal.
There are a few different ways that you can make more money than your regular paycheck. The most obvious is to take a side gig. This could be something on the weekends or a night shift.
If you want to make money without committing too much of your time, you can look around the house for things you don’t use and put them up for sale.
You can do this the old fashioned way by throwing a yard sale or try the new way to sell by putting your things on an online marketplace.
Many people can simply tell their boss that they need a little more money and ask for overtime hours.
Whatever method you use to come into some extra income, make sure you put all that money into the emergency fund to help build it up.
Save Unexpected Income
It’s awesome when you come into some unexpected cash. Whether you find an extra twenty in your pocket that you forgot about or receive monetary gifts from friends or family, this is a great way to add to your emergency fund.
Are you expecting a tax return this year? Why not dedicate a part or all that money to your emergency fund?
If you have a lot of dependents, that can be a tremendous amount of money.
If you have a change bucket, before it gets full and you cash it in, you can make a rule ahead of time that it will go straight into savings. It’s incredible how much money all those coins add up to when you’ve filled a gallon bucket.
Make Budget Cuts
Instead of finding ways to make more money, you may only have the option of cutting back on expenses.
If your week is full and you can’t possibly pick up more hours or part with any of your things, it’s time to look for expenses that aren’t necessary.
Before you can get rid of unnecessary payments, you first need to know how much you are spending. You can look through your bank statements and see if you find a spending pattern that needs reducing.
Are you eating out too often? Is there a particular store that seems to be your weak spot? These patterns can give you clues on where to cut back.
Maybe you noticed that you have a lot of monthly subscriptions. This would be a great place to start dwindling down your expenses. Choose one in each category and get rid of the rest.
When was the last time you compared insurance policies? How about refinancing your home or auto? Can you make an extra effort to use less electricity by shutting off lights and keeping electronics to a minimum?
It’s surprising how much money you spend when you don’t have a plan. It’s time to simplify and downsize to save up a cushion of money to catch you in the case of a disaster.
As you successfully downsize and simplify your life, you'll find those ways to bring in some extra dough. Then you may notice that you can contribute to your emergency fund faster.
It may be that the opposite is true, you aren’t contributing to your savings enough, and you need to start cracking down harder.
Whatever the case is, you won’t know unless you take the time to crunch some numbers. Try to do this monthly to check in and see how your emergency fund is coming.
Seeing your progress can be gratifying, or seeing your lack of progress can be motivating.
Take a step back from your situation and look for ways to save. All the unexpected sources of extra money to contribute to your emergency fund might surprise you!
To get your emergency fund built up, follow these steps:
Automate your savings
Find extra income opportunities
Save unexpected income
Make budget cuts
It may not be easy, and it might take a little extra work on your part, but having that cushion when an emergency does come up is definitely worth it.
Susie is our General Manager and has been with Copper Beech for ten years! Susie is a huge asset to our team. In Susie's spare time she enjoys spending time with her family, her three boys, and her dog Gunner.