Building an emergency fund can sometimes be a challenge because it’s planning for some future unfortunate event you don’t want to happen. By pushing past this mental block and realizing that an emergency fund can actually prevent financial emergencies should motivate you to pull it together.
How much should you have in an Emergency Fund?
One question asked a lot is, “How Big Should My Emergency Fund be?” Many experts in the field recommend 3 -6 months of living expenses in case you lose a job or have a major emergency.
You should also consider you life stage when setting this goal. Are you single, no home, can easily change jobs? Your emergency fund does not need to be as large as married, home plus three cute children.
Most financial emergencies are not job related, but you need to plan around your primary source of income. Consider how easily it will be to find a new job if something happens. Are you in a specialty field? Would you have to move to take a different type of job? All these factors help determine if you where you need to be on the 3 to 6 month spectrum or if additional savings make sense.
How do you define Emergency?
Emergency does not mean vacation, new car or Christmas. Emergency is defined by Webster’s as, “an unforeseen combination of circumstances or the resulting state that calls for immediate action.”
Unforeseen is the key word. It is not something that happens every year or that you did not know about. Your car is on it’s last leg and has over 200,000 miles. When it breaks down this is not an emergency. It is foreseen.
Simple Ways to Build Up an Emergency Fund
Building up 3 to 6 months of living expenses can take a bit of time. Some set aside a certain amount each month to build up the fund while others get intense and sell household items to build up the fund. Here are some simple, quick and easy ideas to build up an emergency fund.
- Sell Stuff – Look around your house for household items, furniture and clothes that you don’t wear to sell. With sites like eBay, Craigslist and Facebook market you will be surprised how many “buyers” our out there.
- Sell Their Stuff – Sell too small clothing and old toys of your children. There are all types of consignment stores and kids resale specifically designed to take this type of inventory. Better yet, go through the toys while your kids are out of the house. We did this at our house and no one missed ANYTHING. It’s been over one month and no one has asked me about that missing stuffed animal.
- Take on an Easy Part Time or Single Time Job – Especially around the holidays retailers are looking for individuals to take on additional shifts. Work a few additional shifts at your current job or work one shift on the weekend at a part-time job. Specify this money is for your emergency fund.
- Meal Plan – This was the easiest way for our family to cut back on groceries. Creating a plan ensured we did not overbuy and we always had something to eat. Meal planning also leads to leftovers which is a great way to save money at lunch the next day.
Continue the conversation about emergency funds with Bola Onada Sokunbi from Clever Girl Finance.