You have an emergency fund, right?
No? Hmmm. What are you going to do the next time your car breaks down and you need a new part to fix it so that you can get to work?
What’s your plan if you get laid off tomorrow and you can’t make the next mortgage payment?
Have you thought about what would you do if don’t have any money saved in an emergency fund? Borrow from your friends and family? Is that really what a responsible adult would do?
Are you planning to live off your credit cards? I don’t have to tell you how financially foolish that would be.
Why do any of that when you already have the money and means to start your emergency fund.
Here’s one sure-fire way you can start your emergency fund today.
Look at where you are already spending your money and instead of spending it on that, start saving it in an emergency fund instead. Pretty easy, eh? No one said that it had to be difficult to start saving for emergencies.
Starting an emergency fund or building onto one is so easy to do especially when you are already spending the money.
Unless you have plans to find a second job and use that money for an emergency fund (highly unlikely as your wants will increase as you see more money coming in) the easiest way to start saving for an emergency is use the money that you already have.
Where are you spending your money today? What can you cut out or cut back on, so that you can divert that money into an emergency fund?
Are you able to cut your cable bill for a few months? That will free up $50 or so a month. What about eating out for dinner twice a week, instead of three times a week? That will add up pretty fast, too, if you saved the money that you would have spent eating out and instead put it into your emergency fund.
Where else can you cut down, cut back, or eliminate money that you are currently spending?
Look through all of your current monthly bills and see if you can survive without the extra luxuries. Can you cut the landline and survive with just your cell phone? That will free up some money that you can gear towards an emergency. What about any magazine or DVD monthly subscription services? Can you eliminate those for a few months while you use that money towards starting your emergency fund?
Can you start bringing your lunch to work a few days a week so that you can save the money you would have spent eating out?
A few dollars every day adds up pretty quickly.
If you were spending $10 a day buying a couple of coffees and then eating out for lunch every day of the week, just cutting back twice a week can save you $80 a month. It doesn’t have to be a huge amount either, as $10 here, $25 there will add up quickly.
Also, cutting back or eliminating some luxuries from your life to build your emergency fund doesn’t have to last a lifetime. It just has to last until you have a healthy balance in your account. Then, you can go back to spending your money as you were before, if that’s what you want. At least you started building your emergency fund and have some cash in case of an unforeseen crisis.
How much should you save in your emergency fund?
The general wisdom is to save 3-6 months of living expenses.
Total all of your monthly bills and then times that amount by 3 for a minimum emergency fund. That may come out to a huge amount, which is okay. It doesn’t have to be saved all at once, you have time to build up to that amount. Divide that amount by 12 and see if the resulting amount is more manageable. Are you then able to save that amount per month and put it towards your emergency fund?
Start as small as you can, but the important part is to start. Once you see the money adding up each month, it will build momentum and you’ll have such a psychological rush knowing that you are prepared for an emergency if it happens.
Where should you put your emergency fund?
I use a high-interest savings account at ING Direct for my emergency fund, although you can use any high-interest savings account. I’ve built my emergency fund up over several months and keep adding to it.
It’s at a healthy level, but I know that it only takes one emergency for it to be wiped out. But, that’s okay, because that’s what it’s there for.
I work in IT and although positions are usually plentiful, there is a lot of competition for good positions. If I ever get laid off, I know that I have the means to live for a few months while I look for another position. I can’t tell you how much security this provides me.
ING Direct is a good choice, I think, because not only do they pay a higher interest rate so that your money grows, they are also an federally insured internet bank. This means that the money I put into my account is not part of my regular checking/savings accounts and is not connected to my debit card. So what, you say? The fact that I can’t as easily spend this money as I don’t have a debit card for the account means that the money stays where I put it.
Money is automatically withdrawn from my chequing account into the high-interest account and accumulates. It’s out of sight, out of mind. It will take a day or two to access the money, but I’ve never had any problems transferring funds back into my chequing account in cases of emergency. It’s very important that the account be one that you don’t use on a daily basis or one where you are easily tempted to spend the money on non-emergencies.
Contact me if you do end up opening an account with them, as both you and I would receive $25 each (you for opening the account and me for referring you). You would already be $25 ahead. How sweet is that?
Get started today with this one sure-fire way to start your emergency fund today. You will feel so much better knowing that you have some money available in case some unforeseen crisis happens.
You’ll be able to handle any emergency because you were prepared financially for it. Don’t delay on this very important step in your financial freedom.
Where else can you find the money to start or build your emergency fund? Let us know by leaving a comment below. Thanks!
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I bought a stature of Rodin’s 
