What happens when you absolutely need money, stat. Not to buy a cute new Michael Kors purse or to grab the latest and greatest Apple device — but to cover your rent when you unexpectedly lose your job or pay for an ambulance ride to the emergency room. Do you have an emergency fund to cover it?
Financial emergencies happen, and if you’re not ready for them they can be absolutely detrimental to both you and your finances. I don’t know about you, but nothing keeps me up at night more often then money problems — there simply never seems to be enough.
What is an emergency fund?
An emergency fund is a stock of funds set aside for if and when you come across a financial emergency.
Financial emergencies are more frequent than you’d expect, and much like other dire situations they, unfortunately, can happen to average people like you and I.
Some examples that could be considered financial emergencies include:
- The sudden, unexpected loss of a job
- A debilitating illness that doesn’t allow you to work
- Simple (or even complex) dental and medical emergencies
- Unexpected home repairs like water breaks or roof replacements
- The loss of a loved one
- Car troubles and auto emergencies
- Unplanned travel expenses
And in all of these scenarios, an emergency fund could be seriously helpful.
Simply put, an emergency fund helps you cover unexpected expenses that cannot be avoided without breaking the bank or rendering you financially unstable.
How much should your fund be?
While the expert opinions on how much your emergency fund should have in it very, but the popular opinion seems to be somewhere between three and six months of your monthly expenses.
That said, if you are self-employed, it’s probably more pertinent to have a larger emergency fund. Many say you might want to consider having a reserve that can cover between nine and twelve months of expenses.
The most important thing when it comes to an emergency fund is that it needs to be big enough that you feel financially secure. I don’t know about you, but I don’t happen to have an extra $12,000 or more to cover expenses on a whim. Enter the emergency fund.
Building your emergency fund
Don’t panic if you don’t have an emergency fund yet, there’s no time like the present to start!
But not having an emergency fund can render you vulnerable to financial situations that could ruin you financially or seriously set you back — so you really should focus on building an emergency fund.
If you’re without one, it’s time to start now!
Tips to saving for your emergency fund starting today
Alright, so we know that having an emergency fund is important and we think we should start now, but how do we do it? Well, I’ve got some tips for you!
WAIT: Before you get started saving, I would strongly suggest that you keep your emergency fund in a separate account, away from the rest of your money so you’re not tempted to access it when you want to purchase something on a whim.
Ok, now let’s go.
Build a savings plan
Chances are you aren’t going to be able to build your entire emergency fund on a whim, and quite frankly, no one expects you to. So to start out, build a savings plan into your regular budget.
Setting aside a reasonable amount monthly, an amount that you can actually afford, can get you headed in the right direction as far as your emergency fund is concerned.
Save your tax refund
Since it’s tax season, it seems fitting to mention that adding your tax refund (pending you get one) to your emergency fund could be a good move. Especially if you get a refund on the larger side, it could set you strides faster towards your end goal.
Save your change
Surprisingly, your change can go a long way if you save it right. Save your change in a jar if you have physical change, or get into the habit of once a day or even once a week of moving your change into your emergency fund.
One of my old tricks was moving anything under $5 into a separate account — whether this is $0.28 or $4.89 it adds up over time, really it does!
Get another income
Having multiple income streams is a good idea, regardless of what you’re building for. But in the case of building an emergency fund, taking on extra work can move you way faster towards your goal.
If you aren’t able to save money by other means, you might need to consider cutting expenses in some areas. Chances are there is a bill or two that you could slice a bit to save some extra money.
Let’s build our emergency funds together
Your emergency fund is incredibly important. Being a single gal means you need to rely on you, yourself and you. And that means you need to be fiscally responsible!
If you’re panicking that you don’t have one yet, it’s time to stop panicking and start building. There’s no sense in dwelling on the fact that you’re not “ready” yet, being an adult is all about figuring out as you go along.
Alright, let’s get our emergency funds started.
The $1,000 emergency fund challenge
We have seven months left in the year, so let’s do an emergency fund challenge! Whether you have no emergency fund or you’ve started but you’re not quite where you want to be, this challenge is accomplishable for all of us. Though we might have to do a little re-jigging with our finances.
The challenge: Save $1,000 by December 31, 2019, to your emergency fund.
How can you do this? Save a little, skimp a little, cut a little and put it away!
Putting away an extra $143 per month seems like a challenge, and it is, but it’s definitely possible. A few trips to the cinema, maybe cutting a pizza delivery and a happy hour and voila! You’re there!
When you break it down to a weekly scale, saving $1,000 seems a tad bit more reasonable. Putting away over less than $26 per week seems fairly reasonable — you might have to sacrifice a coffee or two, or cut it off early at happy hour but you can totally do it!
Check back and I’ll update you on my $1,000 emergency fund challenge progress. Happy saving!
Are you taking part in the $1,000 emergency fund challenge? Share your experience below and sign up for the mailing list to hear about my progress!
Need some money-related inspiration?
If you’re looking for more insights on personal finance and saving money, check out some of our favourite money-related articles:
- How To Save Money On Glasses (seriously, the last time I purchased glasses I got five pairs plus sunglasses for less than $150)
- Get Insurance Before Your House Burns Down (seriously, mine did… well sort of, either
wayyou need insurance)
- 2019 Guide to Side Hustles (making money is a great way to be able to save more money)
Personal finance book spotlight
Jen Sincero’s You Are A Badass At Making Money seriously mad an impact on my persona view of money. If you consistently have a bad attitude towards money it becomes much harder to spend it wisely and attract it!
Jen has a funny charm, great information and an even better attitude, which makes reading this book a breeze (seriously, it took me about two days).
If you’re a Single Girl who wants to be a financially-savvy real adult, then it’s time to take money seriously and You Are A Badass At Making Money can be a quick and fun way to dip your toe in!
p.s. Just a heads up that I am in no way a financial advisor, just someone who cares about my money and (sometimes) manages it like a real adult. Sometimes. This article may also contain affiliate links.