8 Hacks For Building An Emergency Fund On A Budget

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Do you have an emergency fund? If you’re on a tight budget and haven’t started building an emergency fund, now is the time. You’ll sleep easier knowing you’re prepared with a parachute should the worst happen. 

If you haven’t started building an emergency fund into your budget, you’re not alone. According to Marketwatch, one in four Americans has nothing saved should an emergency occur. Those who do have a small fund tucked away aren’t doing much better. Only 39% of those with an emergency fund have enough in their budget to cover a $1,000 emergency.

The experts tell you to start your budget with a cash cushion (when possible) and then start building your emergency fund by tucking away a little at a time. Easier said than done, right? What if your budget is very tight? Building an emergency fund on a budget can be a big challenge. Where will the “extra” money come from?

Well, there’s literally no time like today to begin adding to your emergency fund. Should an emergency come up and you use the credit card, you’re then facing the question of how to pay off your new debt. Either way, you’re going to need to figure out how to come up with the money (and it will cost even more in interest down the road).

Don’t get overwhelmed by the prospect of building an emergency fund into your budget. You don’t need to do it all at once. Simply setting a goal to tuck away something each week or month will add up quicker than you think. The great news is there are a few things you can do to make saving a bit easier, even if money’s tight.

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Here are 8 Quick Hacks to Help you Start Building an Emergency Fund into Your Budget.

1.     Set a Budgeting Goal Today

They say the journey of a thousand miles begins with a single step. There’s no better way to begin than to jump in. So today, start by setting an emergency fund goal (most experts suggest $1-2000 is a good starting point).

If you don’t have a savings goal, then you have nothing to focus on and work towards. You also have nothing to compare to gauge your progress.

Without a goal, you’ll miss your target 100% of the time. On the flip side, when you’ve targeted “exactly” what your goal is and you reach it — there’s nothing better!

Set a monthly or weekly goal (depending on your budgeting style) and commit! Even if you can only set aside $20 per week, you’ll be $80 closer to your emergency fund target by the end of the month.

You’ll find that by accomplishing your goal over and over again, you receive a little boost of positive reinforcement. Relish this feeling and tap into it, to keep up your motivation. You’ll continue increasing your emergency fund bit-by-bit.

2.     Let Someone Close to You Know (and Have Them Hold You Accountable)

Studies have shown that when we share goals, we’re more likely to achieve them. People who share their goal of losing weight are more successful than those who don’t. This sharing strategy works to save money, too!

You don’t have to share all your financial details with your friends (or family) — and I wouldn’t!  Pick the person you’re closest too, like your significant other or a trusted girlfriend, and ask them to hold you accountable. You don’t need to offer all the details, either. Instead, you could share that you’re saving for a larger purchase a little further down the road, or that you’ve decided to start building your emergency fund into your budget.

If other people wonder what’s going on, you could simply state that you’re working on saving money by not going out quite as often. Those closest to you to will “get it” and will support you in helping you achieve your goal, and for those who don’t — they don’t matter anyway.

By sharing your goals with someone close to you, you’ll feel more accountable and supported. Often, we don’t want to let others down or tell them we didn’t hit our target. So use this mindset to your advantage. Enlist your support system because they can be a great source in helping you stay motivated.

3.     Keep the Change

Now that you have the right mindset in place for building an emergency fund, how do you go about the logistics of actually freeing up money  in your budget?!

Do you use cash to make your purchases? If you don’t, it’s time to start! Not only does cash help you stay on track (it’s a lot harder to part with cold, hard cash than it is to swipe a plastic debit card), but the bonus is the extra change.

Nickels and dimes may not seem like much, but that leftover change will help you build your emergency fund quickly. Don’t laugh; it’s true!  Take the excess change and throw it into a jar. I guarantee you’ll be surprised at how fast it accumulates.

When your jar gets full, take it to the bank and dump it in their change machine. There are often coin machines at the grocery store as well (but they include a fee). When you get the payout, put it right in your emergency fund.

For those of you who aren’t using cash (and more on that next), there are some cool apps out there that round up your change and add it to your savings. While I haven’t personally tried these yet, I’ve heard positive feedback. I’m doing research on the best app choices and I’ll share in our resources when I get more information.

4.     Go Cash Only

Speaking of using a cash budget — commit to paying with cash as much as possible. If you do, you’ll find that you’re reducing your spending habits without even trying.

Why does cash work so well? The truth is, we like our cash — A LOT!  When we have cash-on-hand, we don’t want to spend it. When we do spend it, we don’t like watching it diminish. It’s a psychological thing, meaning cash equals security.

By living on a cash-only basis, you’ll discover that it’s SIMPLY AMAZING how you actually CAN  live without something you thought you couldn’t — especially when parting with dollar bills is factored into the equation!

The other bonus with cash is that many people find it easier to budget if they physically move the money into different envelopes. If you prefer the concrete to the conceptual, then a cash budget might work really well for you.

5.     Hide Your Credit Card

If you want to get serious about saving for an emergency fund, it’s time to stop increasing your debt. It’s a challenge (especially if you’re very used to relying on plastic), but it will help you rein in your spending.

Let’s talk about credit card debt and those high balances that carry over from month-to-month. We tend to be much  more inclined to use our credit card now (think: immediate gratification) and worry about the bill later. Is it really worth it? 

According to the current reports on consumer debt, I’m thinking not. The average American has about $16,000 in credit card debt. According to the Federal Reserve’s data for May 2022, the average APR across all credit card accounts was 15.13%.

So basically, we’re stuck in a vicious cycle with our plastic. If you want to build up that emergency fund, you need to start digging yourself out of credit card debt. It begins by committing to stop using your card. Tuck it away in a drawer, put it in a block of ice in the freezer, or do whatever it takes to get your spending under control.

6.     Start a Side Hustle

Assuming you work a full-time job, starting a side hustle is another way to supplement your income and boost your budget while building your emergency fund.

Now a side hustle doesn’t need to be arduous or terrible. There are a lot of fun side job options that can bring in some extra cash. Since you want to make sure to choose one that’s right for you, check out The Side Hustle Strategy to Less Debt, which will help you narrow it down. If you’re working a regular full-time job, the last thing you want is a side hustle that’s going to make you miserable (so choose something you enjoy).

Better yet, you can often find a side hustle from the comfort of your home. Because of the increasing number of people conducting business online, it’s now easier than ever to find quick and easy gigs.

When seeking the right side hustle option, remember to take into consideration your availability, skills, and risk tolerance. The idea isn’t to stress you out or make your life more complicated — it’s about finding easy ways to earn cash so you’ll feel prepared for whatever emergency comes your way. 

7.     Sell Your Excess Stuff to Earn Quick Money

If you don’t have time (or interest) in starting your own side hustle, then another way to get a jump on building your emergency fund is by selling your extra stuff. Let’s admit — we all  have too many things cluttering up our homes.

Look in your closet — do you have shoes, purses, and clothes that you don’t wear? Take all the items that you are willing to get rid of and start selling them off.

Collectibles, sporting gear and equipment, vintage knickknacks, music, and sports memorabilia are all great options with an online market. Not only will you organize your house (and closet, finally), but you’ll have money in the budget for building your emergency fund. 

Look for different ways to sell your items online. There are local options like Craigslist and Facebook Marketplace. Additional online options include eBay, Thredup, or Poshmark. Remember, they say one woman’s trash is another woman’s treasure — someone will want to buy your stuff! 

As you go forward, plan ahead and purchase high-quality items. I find when I buy something that’s long-lasting, I tend to cherish it more. Commit to spending your money on purchases that are worth the investment.

8.     Put Your Refund or Windfall Away

Did you get a tax refund this year? If so, what are your plans for it? I know it can be tempting to use that money to splurge on something you’ve been thinking about, but maybe it’s time to start thinking a little differently.

Instead, splurge on something smaller and put the bulk of your refund into your emergency fund. This “free money” will give you a jump on building your emergency fund with funds that aren’t a part of your monthly budget.

If you get monetary gifts for a birthday or holiday, tuck that “free money” into your fund as well. Bonus at work? Yep, put it in the emergency fund too. Once your emergency fund is built up, use the money to pay off a credit card or knock out a bill.

You can still treat yourself to a little something special, but instead of blowing through your windfall, use that extra money to fortify your savings and pay off debt. In the long run, you will definitely thank yourself.

Start Building Your Emergency Fund Now

I know it can seem like a daunting task trying to save money for an unknown emergency. It doesn’t matter how much you start saving; what is essential is that you start building your emergency fund right away.

The very nature of an emergency is that you never know when one will happen. Even if you don’t have enough to cover it, your savings will help reduce its overall impact on your finances. You’ll at least make a dent in the bill, and every little dent helps!

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Once you get your budget rolling, check out my post on 6 Simple Steps to Get Financially Organized. This post also includes a helpful checklist available in my Resource Library (free to access).

Admittedly, this particular checklist has a larger-scale focus on your overall financial picture, but I genuinely feel that getting your finances organized is essential.

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