Creating an emergency fund is critical in being able to maintain financial stability.   We often hear and read that creating an emergency fund is important but what’s hardly discussed is how to go about doing so.  Let’s look at a few ways to create your emergency fund.

Now if you’re thinking to yourself, how on earth will I do this if I am in debt or having financial issues?  Let’s take a look at that:

Getting Started:

  1. Cut back on spending-drastically.  Everything that you do not need is extra and you don’t need the extra while creating the emergency fund
  2. Cut up the credit cards.  This is often hard to hear but if you find yourself paying a larger credit card bill every month then this is absolutely necessary
  3. Get frugal and start tracking your spending closely.  Every penny counts.
  4. Put away money here and there until you get to the first milestone of $1000
  5. Once you’ve saved $1000, then you can move on to save towards 3-6 months of income

Tips To Maintain and Fund Your Emergency Fund:

Get a Part Time Job

This is often one of the best ways to get a head start.  Every little bit helps, especially if you’re able to find a job that doesn’t require you to find childcare such as a work from home job or freelance writing that you can do from home.

Save Money On Current Expenses

  • Auto insurance
  • Mortgage/Rent
    • Refinance your home if possible or find a cheaper place to live.  If your living expenses are expensive then starting here will give you a significant boost.
  • Utilities
    • Get a programmable thermostat
    • Shut off the high power appliances like your flat screen TV, computers or other unnecessary appliances at night and during the day when you’re away
  • Credit card interest rates
    • Never hurts to ask right?  Call the credit card company and ask for a lower interest rate based on paying on time.  This lowers your monthly payment and overall interest repayments
  • Groceries

Stop Eating Out

When eating out with friends, the final bill can easily get out of hand.  Think about it the next time you sign the check, this money could have been used towards your emergency fund or better yet, pay down on your debts.

Cut Back on Unnecessary Personal Items

I am personally addicted to bath and body products so this is my weakness.  Makeup comes in a close 2nd so I try to stagger my larger purchases or I just don’t buy them at all, outside of the necessities.  But you may have other personal items that blow up your budget each pay period.  Take a closer look at those things you think you can’t do without.  You might be surprised how much money you’re spending on them.

Bank Your Tax Refund

If you’re getting a tax refund in the first place you’re losing.  Thou shalt not give the government an interest free loan for 1 year.  If you’re struggling to make ends meet and have a tax refund coming to you then you may want to revisit that issue.  You can actually start now by adjusting the deductions on your W2. is a good place for you to start.  Better yet, talk to your accountant on what’s best for you based on your scenario as everyone is different.

That said, if you do get a refund, stash it all in your emergency fund.  This gives you a nice boost and in most cases a head start towards creating 3-6 months in expenses.

Hide your Emergency Fund Account

ING Direct is a good place to start with doing this or any other Internet bank.  Do yourself a favor and don’t give yourself access to the debit card for the account as you run the risk of draining it during periods of high temptation.  Think about the best way to hide money from yourself so that it stays safe as you build it towards 6 months.

Think Of The Emergency Fund As A Bill

Treat this task like a recurring bill.  It has an amount and a due date that must be paid to the Bank of You Inc.  If you’re late then you add fees and penalties and if you skip a month then double is owed the next month to make it up.

Double Dipping

This has worked really well for me since I like to be able to save and pay down debt at the same time.  Set up a benchmark amount that you’d like to save and work towards it.  Once you get there, bank that amount into savings.  Then the amounts that you save after that use it towards paying down debt.  You decide what works.  So $1000: $500 might work.  Save $1000 and then use the next $500 saved towards debt.  Rinse, wash and repeat!  This reduces the anxiety about saving for a rainy day while holding on to debt.  In this scenario, you work at both.


What are your strategies for creating an emergency fund?


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