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The number one thing I hear when speaking with family and friends about an emergency fund is…
“How can I possibly save anything when I’m already living paycheck to paycheck?”
I hear you, I was there too. At the time, I had no idea what an emergency fund was.
Today, I am going to show you exactly how to make $1,000 quickly so that you can start to pay off debt without worrying if you’ll be able to cover a minor emergency.
How I Got Into Debt
It started after I graduated from college. I learned that I was expecting just a few months after graduation. So, I moved out with my boyfriend (now husband), bought a bunch of new furniture on some new credit cards, and began to live the life I thought I deserved. During maternity leave, I became a spender. Amazon prime was my guilty pleasure at the time and I slowly began to notice some financial pressure.
A few years later, baby brother came along. I made attempts to save money such as breastfeeding, using cloth diapers and wipes, and I made my own baby food. While it helped cut the cost of raising a baby, I realized that instead of actually saving, I just shuffled the money elsewhere, like Amazon, to buy more things I didn’t need.
I became worse with money over time. Managing two kids, being a wife, managing my home, and working full-time with little sleep definitely took a toll on my abilities to keep up with finances. I missed payments resulting in overdraft fees, I made more impulse purchases, and I did not budget at all.
My turning point was when I literally had $5 before the next paycheck. I had to wait to buy groceries until next payday. Luckily, payday was only 4 days away and I had no automatic payments to go through before then, but the thought of not having money to buy groceries was terrifying! I hated the feeling and I knew it was time for a change.
If I had started a perfect budget and managed to save money, I wouldn’t have been in that situation.
You won’t have to either.
What is an Emergency F
An emergency fund is a set amount of money that you save for the sole purpose of emergencies. It can be referred to as your “rainy day fund”. Not having an emergency fund is what gets most people into trouble. It is your baby cushion for when, you know, life happens.
Top things that qualify as an emergency:
- Medical emergency: kid fell off monkey bars and broke his arm, use emergency fund for co-pay in ER
- Tire has a blowout: use emergency fund to replace tire
- Refrigerator stopped working: tap into emergency fund
- Washer/dryer went out: use emergency fund
- Unexpected travel expenses for marriage or death
Things that do NOT qualify as an emergency:
- Cell phone broke
- Television broke
- New stereo system for car
You get it? The point is, only use this money for when you absolutely NEED it. Spend time to SAVE for everything else.
Why You Need to Have an Emergency Fund
The purpose of the emergency fund is to use it for emergencies. Here is why you need it BEFORE you start paying off debt…
You see, people who don’t have a plan for their money will pay a little more towards a credit card at a time. Then something will happen, like the microwave breaks or the freezer shuts down. They will have to use the credit card to pay for the new microwave or freezer, thus getting nowhere in their debt payoff journey.
If they had an emergency fund, they would not have to use their credit card. Instead, they could dip into their savings to pay for the small emergency avoiding interest charged by credit card companies.
By having an emergency fund to cover these things, you can finally begin to make a dent in your debt without having to rely on your credit card.
How Much Should I Save?
The amount that you save will depend on the area that you live in. The cost of living and prices can be higher in certain areas so there is not one number that will work for everyone.
There are many experts who have wildy different opinions on this. Dave Ramsey, suggests $500 if you are single and $1,000 if you are married with children.
Here is what I think.
You need to assess the type of emergency that could be a possibility in your lifestyle. Figure out the range of prices in your area to deal with those types of emergencies and save the higher end.
For example, I’m pretty sure I could swing a set of new tires for less than $1,000 in my area. I’m also pretty sure I could find a used fridge/freezer combo for less than $1,000. Same for a washer/dryer. However, these prices might be higher in your area. So, if you need $2,000 in your emergency fund, then go with that.
Do your research. Keep in mind this is a baby emergency fund meant for “minor” expenses, not major expenses. That will be covered in your fully funded emergency fund.
Where Should You Keep Your Emergency Savings?
Typically, when an emergency happens, you need the money FAST. Therefore, your money needs to be liquid. This means, that you need to have quick access to your money.
BUT, you don’t want the access to be too easy that you use that money for non emergencies.
You’ll need to keep it out of your checking account for sure.
If you have the discipline, you might be able to get away with a linked savings account at the same bank.
However, if you are a typical “spender”, you need to open
How to Get Started on Building Your Baby Emergency Fund
Building your savings account is going to be a combination of decreasing your spending, finding money in your budget, and making more money.
The first step in saving money, period, is to STOP SPENDING MORE MONEY! Seriously. It’s one of the hardest things to do, but definitely necessary.
Dave Ramsey suggests cutting ALL of your credit cards to make it difficult for you to spend. I will admit that while I didn’t physically cut all of them right away, I took them out of my wallet and stored them in a drawer to make them less accessible when I was out and about. It worked for me.
You need to find money in your current budget.
Start by writing down ALL of your expenses. Include all of your regular bills, variable expenses, and don’t forget about yearly and quarterly expenses.
Then, make a list of expenses that you can completely get rid of. This will be things that you pay for but don’t use, like gym memberships or magazine subscriptions.
Next, make a list of companies that you will negotiate a better price with. Call them to get a lower price or downgrade your service. You may need to switch companies to get a better price.
Make sure that you use that extra money to go towards your emergency savings fund.
If you just end up shuffling that money elsewhere, all of that effort was for nothing. Keep a good record of how much you save each month and apply it to your savings account.
There can be times when you have cut everything out of your budget that you possibly can but you still come short of being able to save. In that case, you’ll need to find ways to make more money.
I’ve included quick and easy ways to make extra cash so that you can start saving today.
10 Ways to Make Extra Money for Your Emergency Fund
Other than cutting your spending, making extra cash will always help you build that $1,000. Here is a list of ways that you can QUICKLY save extra bits of money.
- Yard Sale– sell everything you can. I have yet to do a garage sale so I’ve made my money from selling on Facebook local yard sale groups, Facebook Marketplace, and the Letgo app. I down-sized my kitchen and made $50 just from getting rid of pots and pans, utensils and gadgets. From selling my things on yard sale sites, I made an additional $300 from selling toys, electronics, and appliances from around our home.
- Work overtime at your job– ask your employer if there is any overtime available. Any little bit helps. I was able to pick up 2 extra shifts in one month and made an extra $450.
- Pick up side jobs– consider walking dogs or watching kids for a weekend or two. Watching someone’s kids for an evening out for 4 hours could make you $40 if you charge the standard rate of $10/hr. Pick up someone’s yard for a fee. Write a resume for someone. Install a fan for someone. Change someone’s oil.
- Sell craft items– are you crafty? Consider making homemade signs, body scrubs, dolls, mittens, blankets, t-shirts etc and selling them. This is something I am considering doing but have not had a chance to do yet.
- Flip small items– find items online or at garage sales, like beat up dressers. Buy them cheap, fix them up with new screws, a sanding job, and some new paint and voilà! You have a newly remodeled dresser to sell for profit.
- Resell items– stock items online or in-store at locations such as Amazon, Walmart, Target, and Carters. Visit closeout stores. This is where you can find items on clearance or close-outs for super cheap. Turn around and resell that item for half of the retail price. That way, you make a profit and your buyer also gets a deal. I recently found out that people actually make a living reselling items. I’ve made $80 from doing this.
- Trade services– instead of spending $40 on a babysitter for a night out, consider asking a friend or neighbor with kids to watch them for free in exchange that you’ll do the same for them when they would like a night out.
- Pick up a temporary job– deliver pizzas at night, work in retail for the holidays, work at a library over the summer, or deliver newspaper in your spare time.
- Make tamales– Nana’s way of making extra money. Tamales sell like crazy here in Southern Arizona, especially around the holidays. Consider making food items like tamales, tortillas, homemade cookies, or even decorative cakes if you have a talent for cooking.
- Photography– this is becoming more and more popular among people looking to make extra cash. If you have an eye for photography and lighting, get friends and family to be your Guinea pigs to build a portfolio. Then, advertise yourself all over social media and start booking those sessions!
I’ve made $880 from the list above. I was able to stash the other $120 from decreasing my spending.
I really made an effort to stop eating out so much. When I examined my spending, this was where most of my mindless spending was going. I tried to cook more often and take lunch to work. It’s still a difficult thing for me to do but hey, we are
But by simply making a stronger effort, I noticed more money in my bank that I could stash away.
Saving money and getting out of debt is going to be more than crunching numbers. It’s going to be a lifestyle change that requires lots of determination, consistency, and discipline.
It’s not easy. If it was, everyone would be debt-free right?
So, are you ready to finally get out of that hole so that you can live your life freely? Are you ready to vacation without worrying about coming home to $0 in the bank because you blew your budget? Do you want to shop without worrying if you could afford it?
Start applying these steps today and start to see that baby cushion develop!