HOW TO BUILD AN EMERGENCY FUND IN 2023
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LAST UPDATED ON: 01/08/2024
Do you have an emergency fund?
Emergency funds are essential for rainy days and unforeseen circumstances. Learn how to build and why you need an emergency fund.
WHAT IS AN EMERGENCY FUND?
An emergency fund is a fund reserve for unforeseen expenses.
Emergency funds are also known as rainy-day and do not touch funds. An emergency fund is money that will help you get out of a rut and may help offset some or all of your expenses.
You should have direct access to your emergency fund in case of an emergency.
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Furthermore, you should be able to withdraw money from this account at any time, penalty-free. You should only use this fund for emergencies and replace the money taken out as soon as possible.
WHAT DO YOU USE YOUR EMERGENCY FUND FOR?
You use it for unexpected events such as job loss, car repairs, home repairs, death, and medical expenses, to name a few.
DO YOU NEED AN EMERGENCY FUND?
Yes, everyone needs an emergency fund. However, look at your emergency fund more like insurance on your money.
Emergency funds are primarily for unexpected events that are not in your budget.
Unexpected events are stressful and can be overwhelming. However, if you have the money to fund all or part of that unforeseen event, you will have one less problem.
HOW TO BUILD AN EMERGENCY FUND?
If you do not have an emergency fund, it's best to start by first saving five hundred to one thousand dollars, which can also be considered a pre-emergency fund.
Below are the steps you should follow to get started:
Dedicate a Small Percentage of Your Income to Building an Emergency Fund
Automate Your Savings
Track Your Progress & Set a Deadline
Keep Your Emergency Savings Separate and Only Use This Money for Emergencies.
After You Reach Your Goal - Continue to Save Money and Grow Your Emergency Savings
HOW MUCH MONEY SHOULD BE IN MY EMERGENCY FUND?
As stated above, you should save $500.00 to $1,000.00 for your emergency fund, also known as your pre-emergency fund.
WHAT DO I DO AFTER I HAVE MY EMERGENCY FUND?
Keep saving!
After, you can refocus your savings to grow your emergency fund to three to six months of your monthly expenses.
HOW CAN I BUILD AN EMERGENCY FUND FAST?
The fastest way to build an emergency is to start saving. After a realistic budget is in place, it's best to focus on reducing spending and eliminating unwanted expenses and use that money to fund your emergency fund.
Below are some of the best ways to build an emergency fund fast:
Limit the Number of Times You Eat
Do a No Spend Challenge
Start a Side Hustle
Turn Your Passion into an Income
Ask For a Raise
Save Your Yearly Bonus (If you receive one from your employer.)
Use some of your income tax money to fund your emergency Fund
Get a Part-Time job or a Seasonal Job
Sell Items That You Don't Need on Facebook Market Place or at a Flea Market
Babysit
Open a Bank Account that Gives Signup Bonuses
Do Freelance Work
Sell Bake Goods
IN CONCLUSION
Emergency funds are essential to have for unexpected events. However, building an emergency fund is pretty simple. And the best way to start building one is to begin.
After a solid budget, start saving whatever you can afford and gradually increase that amount over time. Start small by saving $500.00 to $1,000.00. Then focus on growing your emergency fund to three to six months of your monthly expenses.
