Are you financially prepared for an emergency? Unfortunately, emergency situations will happen and failure to prepare adequately can wreck havoc on your finances.
The best way to protect your finances is by starting a rainy day fund.
But like any savings goals, an emergency fund can be challenging to build, especially when the money is being set aside for simply a potential use. Though saving for other things, like a house, car, or vacation gets you something for your efforts, the only thing you get out of saving for an emergency is protection. While the protection offered from an emergency fund is less glamorous, it should be one of your top priorities.
Agreeably, between paying off debt, keeping up with your regular expenses, and meeting your other financial goals, there might not be a lot of money left over at the end of the month to save for an emergency fund. The good news is that even a small emergency fund can protect you against many unexpected expenses, like immediate car repairs, a large doctor bill, and more. In just a month’s time, you can build a mini-emergency fund by following these tips.
Sell Your Stuff
Selling your old stuff might seem like too easy of an answer, but I strongly advocate for it. You would be surprised by what people will buy and how little work it takes.
Look around your house or apartment. Are there items you no longer have a use for? Tools, bicycles, electronics, and furniture are all in demand and can sell for likely more than you think. Personally, this month alone I have sold a few old pieces of furniture and appliances and made over $600 with minimal work.
You can list items for sale on sites such as Craigslist or local Facebook groups. There are also many apps that act as similar marketplaces, such as Let Go and OfferUp.
Challenging Yourself to a No-Spend Month
Take an in-depth look at your budget. Can you operate on a bare-bones budget for just one month and use the extra cash to pad your emergency fund? By cutting out unnecessary expenses, such as restaurants, salon appointments, entertainment (including cable), and big purchases for a month, you can fairly easily find extra money to stock your rainy day fund.
Read Why You Should Consider a No-Spend Challenge to learn more about the benefits of a no-spend challenge.
Automate Your Savings
Want to save money with minimal work? Automating your savings is the easiest way to save money without even trying.
Put your emergency fund in a separate bank account from your regular savings. This way, you are less tempted to use it. You can automate your paycheck to have part of your paycheck go into your emergency fund savings and the rest can be contributed to your regular savings or checking account. Even saving just a few dollars from every paycheck can add up to build an emergency fund.
Get a head-start by claiming a free $25 by signing up for a free Capital One 360 Savings Account.
Start a Side Hustle
Extra income from side hustles is one of the best ways to create more opportunity for saving money.
But if you’re looking to quickly build an emergency fund, you can find side hustles such as mowing lawns, baby sitting, pet sitting, or house cleaning. By picking up a couple of these extra gigs a month, you can add a few hundred extra dollars to your emergency fund.
Cut Back on Debt Repayment
While paying extra money towards debt each month is a constructive way to improve your finances, if you don’t have an emergency fund yet, you are only putting yourself at risk. Instead of paying extra towards debt this month, try putting that money aside into an emergency fund.
Mathematically, it makes sense to pay off debt first. But paying off debt without an emergency fund puts you at risk to take on even more debt (here’s 10 examples of unexpected expenses that can come up without warning). If an unplanned emergency came up, would you have to take on more debt to cover it? By saving even a small amount of money for an emergency fund, you can then move forward and pay off debt knowing that you can cover a small emergency without undoing all of your hard work.
Do you have an emergency fund? If so, how did you start saving money? If you haven’t started an emergency fund, how can you implement these tips to begin one today?