How to Build Emergency Fund

Powerful Ways to Build an Emergency Fund to Improve Finances

How to Build Emergency Fund Let’s face it; life is going to hit you with some unexpected challenges. We all have had times when life happens, and it is surprising that not being prepared has sent our finances in a downward spiral for months.

An emergency fund is crucial in our lives and even more now that we are still facing COVID 19. Take a look back when the whole world suddenly experienced lockdown due to the virus’s continuous increase of affected people.

Millions of people lost their jobs and income when the pandemic started. I started feeling the effects because our entire industry shut down. We couldn’t show homes to our clients, and it became apparent that we would be in lockdown for longer than a few days. 

That experience made me grateful to have an emergency fund; however, it made me think of the people who don’t have one. Ask yourself, if a true emergency arises, are you prepared for it? I’m not talking about poor money planning or something recurring. Remember a genuine emergency like your car breaking down or unexpected medical bills outside of your insurance. While this exercise will cover how to put $1000 away for a rainy day, a good emergency fund is having 3-6 months of your bare minimum expenses, but aside just in case, there is a loss of income.

How do you Analyze your Budget Data?

It is essential always to be sure that you review your budget daily, at least initially. Doing this will help you to see if you are still in line with your current financial situation. Start tracking your spending to know when to stop if you reach the limit then check the areas where you’re overspending and don’t forget to check if you are reaching your financial goals.

Building an emergency fund takes time, sacrifices, and discipline. Improve your financial mindset! Don’t give up, and just keep pushing! Remember, this is the foundation of having a safety net to get on to the next stage of building your wealth.

Next, I will explain how to build an emergency fund to get to your first $1,000; it is a strategic method you must take action on today!

STEPS FOR BUILDING EMERGENCY FUND:

Here are the steps you need to consider on how to build emergency fund fast.

1. Stick to or build a money plan; this will help you better prepare for life’s events. Preparing for this will also help you have fewer financial emergencies because you are ready for it.
2. While paying off debt is important, you want to get to your emergency fund to $1,000 at first and then get to pay down debt faster. 
3. The best way to start building your emergency fund is to start selling stuff. I know this sounds insane, but I’m not talking about pawning your precious jewelry; I’m talking about selling things that you don’t use anymore. Take a look in your garage, your closets snd basements. If you haven’t used those old electronics in years or have clothes that you know you will never fit in again, it’s time to post them on a selling marketplace (Offer-Up, Facebook Marketplace, Etc) and declutter. Not only is your space freed up from unwanted items, but you will also see your emergency savings grow exponentially. 
4. Boost your income; doing side hustles to get to your emergency savings goals will help your fund multiply. Leave a little early for work and drive Uber, pick up a route with insta-cart to make a little extra income by going grocery shopping for someone else. 

Other Tips to Building Emergency Fund: 

• Know your Goals and Stick to it

The most powerful way to achieve your financial goals is knowing your goals, setting plans, and sticking to them.  You must open an account that cannot be accessed with your debit card. 

• Don’t Increase your Monthly Expenses

Money planning allows you to create a spending plan for your money. Following the best strategy like “The Money Plan” will enable you to always have enough cash for what you need. 

• Auto-mate your Deposits

You need to automate your deposits to ensure that the money is going directly into your savings account. When you schedule automatic payments to your emergency fund, you won’t worry if you’re going to forget to transfer the money.  

• Search How to Cut Expenses and Boost Income 

Increasing your cash flow and cutting back your expenses can make a huge difference. Selling the things you don’t need can help boost your income or get a different side hustle, such as freelancing, like doing a few articles or blogs.

• Use Emergency Funds when it is needed. 

Sometimes it can be tempting to use some funds on the purchase you want, so do not sabotage yourself and commit to leaving your emergency fund untouched if you wish your emergency fund to grow. If should answer YES to these three questions: 

• unexpected?
• necessary?
• urgent?

Building your Emergency Fund

The key to this step in your wealth-building process is to get started today! Think about what your life would look like with a safety net. An emergency fund is a safety net between you a life. It sounds cliche but believe me knowing that you have money set aside for a rainy day is essentially one of the assuring things you can do. 

Now that you have decided to take action today, put your emergency fund in place not easily accessible. Online accounts are ideal for this. Many online banks have a policy that you have to request your funds to be deposited into your primary account, which typically takes 24-48 hours. You can access this money in a genuine emergency, but it’s not readily available on those “emergency” trips to Target. Don’t get caught up in that. Take your time to budget for those shopping trips versus dipping into your savings account for “On Sale” Splurges. 

Having this fund is peace of mind. Think about a roof leaking or a heater going out. With your emergency fund, a crisis turns into an inconvenience that money can handle. Looking at life’s emergencies this way allows you to focus on the things that truly matter, like our families and what we love to do.

Building your emergency fund is a bit challenging, but all you need to do is stick with your plan, and you will experience and see the actual results of your hard work. 

Take the challenge in our community when it comes to building wealth. Using our digital planner as a tool to generate wealth is life-changing. Download your digital planner here.