How to Build an Emergency Fund So You Can Start Hitting Goals

Building up an emergency fund and creating a savings strategy is such an incredible way to get rid of the drama in life.

Because when the car starts making noises or you’re not so sure if you need to head to the ER, just knowing that you have a savings specifically set aside for unexpected financial emergencies can give you so much peace.

But beyond getting rid of the stress, it’s also an amazing way to make sure you’re hitting your goals. And this is something I don’t see a lot of people talking about.

Knowing that your financial or lifestyle savings goals are safe from being drained when unplanned expenses pop up gives you so much freedom and gets rid of unneeded stress.

So if you’d like to know how this works and how you can quickly build up your own emergency savings, then keep scrolling so you can protect yourself and start saving this week.

How an Emergency Fund Can Keep You on Track With Your Goals

An emergency fund is an amazing way to recover quicker, get back on track, and hit a specific goal.

And for you, that might be finishing college, becoming debt free, moving to a state you love, owning a home, retiring earlier, or even starting your own business. And whether this is a short or a long term goal, a big or a small dream, you’re gonna need money.

So how does an emergency fund help with this?

Well let’s just say you’ve already been saving up for this goal for a couple of months. You’re almost to a grand, just over, or well past it and you’re proud of the progress you’ve made.

And then a financial shock happens. The car decides that it wants to start having problems, a storm destroys a part of your roof, or someone steals the laptop you use for work.

Now that dream stash has suddenly been turned into an involuntary emergency fund.

And even if you have insurance for a car crash or a hospital visit, a lot of the time there’s going to be a deductible. So that might mean you’ll have to pay a grand or more on the car. Or a couple grand on a medical bill for your spouse who needs immediate attention.

Now you might think that any money you get should be set back for your dreams. And especially when you’re not making that much already. After all, what you want to do in life should be first priority.

And that’s true, but putting money aside to create a cash reserve will help protect you from setbacks and ensure that those dreams actually become a reality.

So How Much Should You Save?

Whether you’re trying to pay off a debt or save up for a vacation to Italy, you should have at least $1,000 setback for your emergency fund.

And from there, you should start working towards saving up for 3-6 months worth of living expenses. Because job layoffs, loss of income, or serious illnesses happen, and it’s best to be prepared.

Now when I say living expenses, I mean what you actually need to get by. Don’t factor in coffee runs or eating out. Only what you need.

And while this second step is optional, and it may take some time, it’s definitely worth looking into how much you’ll need to get by for three to six months for your financial security.

What Qualifies as an Emergency

Usually if you have to question it, it’s not an emergency.

Emergencies are things that pop up unexpectedly and couldn’t be planned for. Hence why you need a dedicated savings for things like that; they require immediate attention.

If you see something ahead of time and it could have been saved for, whether it’s Christmas, a trip, a wedding, or even an anniversary, it’s not an emergency.

But let’s say an unplanned bill comes up. Go over your bank account, see how much you have, and then decide whether can squeeze by until the next paycheck. And make sure you know the things you can do without! Cut back on what’s unnecessary now so that the reserve fund doesn’t get cut down.

How to Build Up Your Emergency Fund

Do a Spending Audit

When saving, you need a game plan. Don’t just check your bank account once a month and wonder where all the money went. Set up a time every week to track your spending and see where it‘s going.

And when starting your spending audit, look at the last few months and see what your biggest expenses have been, and then look over all the small expenses. It can be so easy to overlook the small things like the occasional coffee or item purchase. But when they add up, they end up being a big money waster.

So figure out where the money is going and decide on what unnecessary things you can cut out or cut down on. Then decide how much of the money saved will go towards saving up for your emergency fund.

Redirect Your Spending

Every time you’re tempted to spend and get a coffee or go shopping, take that money you would have spent on that item(s), and put it right into your emergency fund. Then you can watch the money stack up in your favor instead of being a drain from your account.

Set Up an Automatic Withdrawal

Every month that you’re saving for your emergency fund, you want to live as if you were being paid less than you are.

So if you’re making around $3,500 a month (or less), decide what you can do without, cut out the unnecessary spending, and decide on a percentage you want to live off of. Then set up an automatic recurring transfers into a separate account.

That way what you’re saving automatically and you’re making consistent contributions toward your emergency fund automatically. Out of sight, out of mind.

Speak With Your Boss About a Pay Raises & Overtime

I was told by a very wise person that you’re not making money until you’re making overtime. And it’s true, especially when you’re living paycheck-to-paycheck.

So approach your boss and ask if you can put in overtime or even fill in a few shifts.

And if you know that you’ve been doing good work and going beyond what’s expected, then find time to speak with them about getting a raise. It’s a simple way to increase your income and save more for your emergency fund.

Know What You Actually Deserve

It can be so easy when you’ve been saving and not going out to tell yourself, “I deserve it.” And it’s true, you do deserver good things. But it’s not that moment of immediate gratification. You deserve to see dreams and goals being reached and achieved.

You deserve to eat in a restaurant in Asia or Europe, not the restaurant down the street.

Cutting Food Expenses

Now we talk more about this in our post, How We Eat Better For Less, but one of the best ways you can save money, but still eat great, is to meal plan.

We found that eating out was almost always unplanned because our meals never were. So when we knew that we had an amazing meal planned that night, we didn’t want to go out and that helped us save a lot of money each month.

And even if you don’t eat out often, you should still meal plan before going to the store. Otherwise, taking a trip to the store will cost you a lot more than necessary. This is especially important if you’re you’re dealing with irregular income and want to build up your financial well-being.

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