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Tuesday, February 9, 2010

5 Ways to Build an Emergency Fund

Having an emergency fund.... Just close your eyes and picture that for a minute. Doesn't it bring a small measure of peace to your heart? Right now, we have our baby emergency fund ($1000) sitting in the bank along with a little extra we stashed away for some medical expenses. But that little emergency fund makes me relax a little.

I remember what it was like before we had our emergency fund started. EVERYTHING was an emergency! We ended up using credit cards for things like car repairs, because we didn't have the cash to pay for them. Now that we have the emergency fund, we seem to have fewer emergencies. When we do have an emergency (like an unexpected car repair), we can borrow the money from ourselves, restocking our emergency fund as we're able.

But how in the world can you start an emergency fund, especially when money is tight? I know that many families are living paycheck-to-paycheck right now, making the thought of saving $1000 look highly unlikely. Been there... done that... have a couple of debts left to pay off to show for it!

Here are five creative ways to start saving money and building that baby emergency fund.

  1. Eat breakfast at home, and pack a lunch.

    This one is near and dear to my heart, because it's the one that I'm SO guilty of! I don't usually remember to pack my lunch the night before my work days, and I'm in such a hurry in the morning that breakfast is whatever I can grab. When I'm really running late, you'll find me driving through McDonald's or stopping at a convenience store for some breakfast and then eating fast food again for lunch. Not only is this unhealthy for me, it's unhealthy for our budget!

    If I can remember to pack lunch the night before, I can save about $5 by not eating lunch out. My packed lunch does cost a little, but nowhere near what I spend at the drive-thru. If I can remember to put something out for breakfast, I can avoid spending another $5 in the morning. That's $10 for every day that I work. I only work three days a week, but that's $30 per week x 52 weeks in the year.... or $1560. Sounds like an emergency fund to me!

  2. Don't discount the small stuff.

    While it might be nice to stop by the bank and deposit $1000 all at once, that's not usually the way that a baby emergency fund is funded. Instead, it's funded $5, $10, or $20 at a time. If you can save an extra $5 at the grocery store this week, put it toward your emergency fund. Now you only have $995 to save. If you get a $10 rebate check in the mail, put it toward the emergency fund. Now you only have $985 to save. Chipping away at the $1000 is much easier than trying to come up with $1000 all at once. You'll be amazed at how quickly those little deposits add up!

  3. Designate gifts for the emergency fund.

    Do you have family members who buy you gifts for your birthday or Christmas? Let them know that there's nothing you'd like better than to have an emergency fund. Maybe they would be willing to give you a cash gift instead, and you can add that your emergency fund. I know that there's nothing I'd like more than to help a friend or family member gain a little peace of mind by contributing to their emergency fund in lieu of a gift.

    You can do this with your spouse too, as long as both of you are willing. Skip the gifts for Valentine's Day, Christmas, and birthdays for a short time, and put what you would have spent toward your emergency fund instead. If your spouse isn't a fan of shopping, this is also a nice reprieve!

  4. Sell some stuff!

    Oh, I know we all have a lot of STUFF. There's stuff we don't even remember we have! If you're really serious about building your emergency fund, why not sell some stuff? You could have a garage sale or yard sale if the weather permits. You could list some of your items on eBay or Craigslist. Maybe there's a consignment store near you. Why not drop off a few things to sell? You may not make a fortune, but wouldn't it be nice to earn $100 or $250 toward your emergency fund? Plus, you can declutter your house at the same time!

  5. Pare it down, even if it's just for a short time.

    I'm talking about lifestyle here. Do you have cable? If you pay $50 a month for cable and you did without it for 6 months, you could put $300 toward your emergency fund. (You could probably also get a sweet deal for re-signing up with the cable company in six months!) Can you do without your landline and just use your cell phones? Can you cut down the number of times you eat out? Can you take a two-month break from shopping for anything but groceries? If you start to make a list of the things that you can do without - even if it's for a short time - you might surprise yourself at how much you can afford to put toward an emergency fund.

Having an emergency fund is so important. I can personally attest to the peace of mind that comes from knowing that we have that little cushion between us and life. Once we have our last two debts paid off, we'll be aggressively saving toward our regular emergency fund (three to six months of living expenses). I can't wait!!

Do you have any other ideas for creatively funding an emergency fund? Do you have an emergency fund? I'd love to hear your thoughts on this topic!

This post is linked to Works for Me Wednesday hosted by We Are THAT Family and Frugal Fridays hosted by Life as MOM.


Jenny said...

It's been great to have an emergency fund. We've used and built back the fund several times. It's awesome knowing that the emergency purchases didn't go on a credit card and we are paying interest.

We also have 2 last debts to payoff and then we'll start a car savings fund and the regular emergency fund.

Milehimama said...

For a while, it was tough finding even pennies to stash in the Emergency Fund. But stores will often let you write checks for over the amount. So I would clip coupons to save money. But here's my trick.
Checkout, and write the check for the TOTAL. THEN give the cashier your coupons. Pay the original total and she'll give you back the change. (You don't have to write a check for an even amount over!)

Anonymous said...

You're so right about the small stuff adding up! I've been blogging about saving for my 2010 goal - a quarter of our income this year - and we're on a very limited income. I've already saved over $400 this year! Crazy how when you put your mind to it and work out the pennies, the dollars fall into place. :)

Elizabeth said...

Thanks for the tips! I'm only 21 and pretty money savy but I know that I need to be a better saver because a time will be coming in my life where I'm not just responsible for me. I'd love to go into a marriage with a little extra for me and my honey to be able to rely on!

Sherry said...

Awesome tips! We finally got rid of our debt and can start putting money away. :D

Have a great Wednesday!

Jen@balancing beauty and bedlam said...

Speaking from someone who has lived off of their emergency fund for the last can literally impact your life SO MUCH!

Greg and Donna said...

Great are a couple of more you may not have thought of. If you drink soft drinks buy a 12 pack and pack a drink for your errands or lunches. This is so much cheaper than running into a gas station or drink machine at work. Also, save all your change and designate that for the emergency fund. Every little bit helps!

The Homemaker said...

Preach the Dave Ramsey girl! We are about one year out from starting step #3 and I"M SO STINKIN EXCITED! One of the biggest ways that we have saved money over the past few years was your tip for cutting out stuff. It's what started my blog!
My first few entries were devoted entirely to saving money. I called it "Tightwad Tuesdays" since our FPU class met on Tuesdays! Thanks for the tips...

Julie Bagamary said...

Thanks for such a great post! Hubby and I facilitate FPU at our church and it's great seeing folks get out of chaos and debt.

Young Wife said...

An emergency fund is so important! Thanks for the tips! We got rid of cable and started using Netflix. It's much cheaper, and I love it. One other way I try to save is on gifts. I can spend A LOT of money on our nieces and nephews if I let myself. Now, I try to find unusual, thoughtful presents and not go overboard.

Lori @ Couponomic Stimulus Package said...

Great Post!!! Totally goes along with the budgeting series I've been doing. I'd love it if you'd link up on my Tuesday's Tips at

Jenny said...

we don't have anything like that. we have to many bills to pay to afford to save anything. it makes me sad.

CRAZYMOM said...

great ideas!

who doesn't need a savings account..especially these days.


building an emergency fund said...

There is a great possibility of unexpected expenses for which we should keep some money as emergency fund. Post is giving great detailed knowledge regarding emergency fund, it will help the people who is having some less idea about it.

Forever Neighbor said...

We just in the past week reached our emergency fund! I love seeing the money in the savings brings so much peace. When I set up the savings account I did not use it for overdraft protection! I feel like I can breathe a little bit now.

Leslie said...

those are great ideas! I just started couponing and also doing rebates when i come across them. This year I'm designating all my rebate money for food storage (since we have an emergency fund). I love the idea of those little bits of money adding up to something important and needed for emergencies.

Jennifer said...

Great tips! Our emergency fund is such a relief during stressful times. I think back to the days when we didn't have one and cringe at the stress we felt over every little thing.

Jennifer said...

Wow! It sounds like you all have some stories to tell! I'm glad to hear that so many of you have an emergency fund in place. It is invaluable.

For those of you who don't have one, especially those of you who are struggling financially, I hope that some of the tips I shared with you will help you start down the path to having an emergency fund. As Jen from Balancing Beauty and Bedlam mentioned, you never know when you're going to need to live off of your emergency fund for a time. That's why I'm really looking forward to building our big emergency fund after we finish paying off our debts.

Thank you all for sharing your thoughts and stories!

~Alison~ said...

Wonderful ideas! Currently we don't have an emergency fund and I'm holding my breath and hoping our fridge doesn't die on us!
I'm going to have to start socking some money away here and there.
I have a $3 rebate check on my fridge waiting to be deposited....only $997 to go! :)

Lesley said...

Way to go guys!

I am currently saving up for 6 months' worth of expenses, and I am 22 per cent there! WooHoo!

One other tip to add: When I'm paying cash for groceries (as Dave Ramsey suggests) I always give whole dollars, never change. I put the change in my pocket, and it goes into the Savings Jar!

As many have noted, every little bit helps! From small acorns do mighty oak trees grow.


Michele @ Frugal Granola said...

We do most of these steps, too, and they really help! Great WFMW! :) These are great ways of being a good steward of our finances.