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I’m sure you’ve heard this expression before: save money for a rainy day, right? Growing up, I often heard this expression, but I didn’t quite understand what it meant. When I became an adult, I quickly realized that rainy days will pop up from time to time. In some cases, when it rains, it pours!
Unexpected events are going to happen and there’s no way to avoid them. Having an emergency fund in place keeps you from going deeper into debt and it allows you to have money readily available. There’s no need to rely on credit cards!
Ask yourself these questions:
- How many times have I been in a situation when I needed to come up with cash that I did not have?
- If something happens today, do I have money available to cover unexpected events?
If your answers to these questions are a little questionable, you should start an emergency fund.
What is an Emergency Fund?
It’s self explanatory. It’s a fund that’s created for the purpose of covering unexpected or sudden expenses in the case of an emergency. The reason why this type of account is necessary is because, you don’t want to find yourself stuck between a rock and a hard place. You want to have some sort of cushion available should a sudden medical emergency arise. Think of it this way, your emergency fund is your insurance for unexpected events (should one occur).
A few years ago, I was leaving for work when I realized my car had a flat tire! After 30 seconds of pandemonium, I called my boss and then I called Roadside Assistance for help. Roadside Assistance arrived within 20 minutes and they placed a donut on my car. This held me over until I could get to the shop.
Once I arrived at the shop, I priced the tires and quickly decided that I wanted to replace my tire. If I didn’t have the funds in this emergency account, I would’ve freaked out over the entire situation and eventually used my credit card to cover the cost.
Listen! If you’re drowning in debt, the best time to start climbing your way out is right now! What are you waiting for? The secret is placing a few dollars into your account every month and watch it grow. That’s it!
Here are five ways to build your emergency fund.
Step #1 – Set A Monthly Savings Goal
When I decided to fund my emergency fund, I had $0.00 in my savings account!
I wanted to establish a savings goal that would be attainable, I started with a goal of $1,500. This amount was comfortable for me because I knew this would be an easy goal to reach. Yes, I could’ve set a goal of $3,000 or perhaps $5,000 but I knew that it would be impossible to reach. Set a SMART goal as opposed to an unrealistic goal.
I took $1500 and divided it by 12 (this represents 12 months). This calculation shows me that I need to transfer $125.00 on a monthly basis. Seeing the goal broken down like this shows me how easily I can attain it.
I took it an extra step by figuring out how much I need to take out of each paycheck to reach my monthly goal. I took $1500 and divided it by 24 (this number represents the number of paychecks that I receive in one year). Now, I know that I can transfer $62.50 out of each paycheck to reach my goal of $1500 in twelve months.
If you don’t want to do this you can always cheat by using a money saving challenge. There are so many challenges to choose from. Click here to download my money saving challenge worksheet.
Step #2 – Keep Cash Separate – Use High Yield Savings Account
When I decided to start an emergency savings fund, I needed to house it somewhere where I would not be tempted to touch it. My savings account had zero balance because I always transferring money back into my checking account to purchase items that I did not need.
I researched many options and I decided to house my money with Ally Bank. I selected this bank because I wanted an account that provided the following perks:
- FDIC Insured
- No hard inquiry to open an account – I’m already in debt, I don’t need my credit score to go down any further.
- Has no monthly maintenance fees
- No minimum deposit
- Higher APY (annual percentage yield) than traditional brick and mortar banks – They’re currently offering 1.60%
- 24/7 Customer Service
I love my traditional bank, but I can’t make any money from it especially with an APY of 0.03%.
Step #3 – Eliminate Non-Essentials from Your Budget
Another way of building your emergency fund is to eliminate non essential items from your budget. If you have gym memberships, subscriptions and other varying items on your budget that are no longer needed, get rid of them.
Some examples include:
- Impromptu trips to Starbucks
- Eating Out EVERYDAY
- Unused gym membership
- Unread magazine subscriptions
- Cable (you spend most of your time on Netflix anyway)
- High Cell Phone Bill
I’ve had to make changes to my personal budget because I was paying for items that I no longer used.
In fact, I had a storage unit. Had this unit for years and the has price continually increased over the years. One day, I realized that we have this storage unit and I can’t even begin to tell you what’s in it. So, we decided to clean it out. There were things that I came across that triggered a memorable memory but I still proceeded to eliminate that item because it currently serves no purpose.
Today, I have an extra $300 a month to place towards savings.
Comb through your budget to see if there are items that you can eliminate, if so do it ASAP. It’s time to stop paying for items that you no longer use. Keep your coins in your wallet.
Step #4 – Earn Extra Money
This is my favorite section! Earn extra money. Woot. Woot. There are so many online jobs that allow to earn extra money. You can get a side hustle, start a blog, take surveys from home, use cashback apps, become a notary, become a virtual assistant, etc. There are many endless opportunities available, the sky is the limit.
There are many advantages of earning extra money. You can quickly accomplish your financial goals, you determine how much you make, you determine your work schedule (if you haven’t picked up a part-time job that has pre-determined hours).
Here’s a list of some of my favorite ways to make money from home:
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Swagbucks
Swagbucks is one of my favorite cash back sites that I use on a daily basis. When I initially signed up I didn’t take it seriously. However, when I found out that I was pregnant in April 2019, I decided to take it seriously and I’ve earned $503.60 from the site. You can earn money from Swagbucks by searching the web, taking surveys, watching videos and making online purchases. If you download their SB Answer app, you can receive additional points by taking pictures of your receipts. Yes! It’s just that simple. Give it a try, you have nothing to loose. Click here to join for FREE today!
If you sign up through my link, you will earn an additional 300 SB (Swagbucks Points) only if you attempt to earn 300 sb on your own in the month you sign up. Once you make 300sb in the first month and want to stop using Swagbucks, wait until you receive your additional bonus. Cash it out and treat yourself to a Starbucks coffee, on me. LOL. -
Ibotta
Ibotta is a FREE couponing app that you can download on your phone to save money. You can earn cash back for purchases made at Walmart, Target, Costco, Walgreens and more. Your cash back will be deposited into your Ibotta account within 48 hours of your receipt scan.
You can transfer your money from your Ibotta account to PayPal, Venmo or you can place the funds on a gift card. Click here if you’re ready to receive cash back on your groceries. -
Respondent
Respondent is a market research site that pays you to participate in focus groups and research studies. There are so many companies available that are looking for qualified people to participate in their research studies and get paid for providing their opinions. The best part is you get paid through PayPal. You can earn as much as $250.00 just for providing your opinion.
When you sign up through their site, you answer a few questions so you’re matched with the best studies that match your criteria. When a study appears that you’re interested in, you will need to select it and apply again by answering a few qualifying questions. After you’ve submitted your responses to those questions, someone will contact you to let you know if they see you as a good fit for the study. FYI – you only get paid if you are accepted to participate in the study and you show up for the study.
Click here to join Respondent. If you sign up and participate in a qualifying study, I will also get paid a bonus for referring you to Respondent.
Step #5 – Use Your Tax Return
Every year, Americans look forward to receiving a tax refund. The reason why we receive tax refunds is because we have overpaid taxes to the government throughout the year and we are receiving that extra money back.
In the past, I’ve used my tax return to help me pay off debt or to reach a particular savings goal. Rather than splurging on unnecessary items that don’t hold much weight, save that refund. Deposit it into an emergency fund. This is the best gift that you can give yourself, especially if you’re like me and you’re still in debt.
I can guarantee you one thing, if you continue to make your monthly contributions into your emergency fund and you deposit your tax refund into this account, it will definitely be well worth the investment.
