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How to Build an Emergency Fund

What is an Emergency Fund?

An emergency fund is an account for funds set aside in case of the event of a personal financial dilemma, such as the loss of a job, illness or a major repair to your home.  Christmas, birthdays, anniversaries, vacations, monthly bills and things that of that sort are not emergencies and should not be spent from this account.

Why Do I need an Emergency Fund?

Having an emergency fund can help you avoid borrowing money. An emergency fund can keep you financially secure in a time of need without having to rely on credit cards.   Not having emergency savings is one of the reasons people carry high loans and money problems which results in stress in marriages.  Again, just think how much more secure you would feel with $12,000 in the bank. Dave Ramsey says that emergency would no longer be emergencies but merely an inconvenience.

Where Should I Keep My Emergency Savings?

Money market accounts are similar to savings accounts in that they can offer higher yields. You can open a money market account online or at a local bank. Money market accounts are easy to use and your funds can be withdrawn at any time, they can be a good option for your emergency savings.

How Do I Start Building My Emergency Fund?

    • Set a Goal.  If you were going on a trip before you leave you would first need to know your destination.  Setting a goal will get you into the habit of saving regularly. One way to do this is by automatically transferring funds to your savings account each time you get paid before you pay your other bills.  You really want to get in the habit of paying yourself first!

    • Sell Online. eCommerce provides new channels for you to reach more customers. It is one of the biggest online marketplaces in the world with over 177 million active users according to  If you want to start making yourself some extra cash or set up your own small business, here’s my guide to help you achieve that goal.

    • Sell a Vehicle.  If a vehicle you own is rarely used, consider selling it. If nothing else, you’ll save money on insurance. If you’re able to get market price for your vehicle, you could also use the proceeds to beef up your emergency fund.

    • Carpool.  If you have an opportunity to share a ride to and from work with someone else, you can significantly reduce wear and tear on your car, save on gas, and saving on money.  Consider using the pool option on Uber.

    • Unplug Electrical Devices.  As insignificant as this may sound,  Most electronic devices constantly draw a small amount of electricity, a phantom charge, that can add up quickly when you consider just how many devices and small appliances you own. To eliminate that usage, unplug any items or power strips you use infrequently and put the difference towards building your emergency fund.  Try a good Energy Saving PowerStrip and Surge Protector.

    • Cook at Home.  When you cook at home, make a lot of whatever you’re preparing so you can freeze some of it for future meals and, even better, take some leftovers into work for lunch. The majority of restaurants charge their customers at least 4 times more than what they paid for it.  That really makes it hard when you are trying to save money at restaurants. Take the additional savings and build your emergency fund.  Check out this section for more ideas for cooking at home.

    • Cut Expenses. See which parts of your monthly spending you can trim, so you’ll have cash left over to build your emergency fund. Some ways to save include carpooling, cooking more meals at home, saving leftovers and avoiding small daily purchases such as takeout coffee.

    • Supplemental Income. You can stack up your emergency fund by getting a second job.  Consider driving with Uber.  Uber is one of my favorites because you choose your own schedule and earn a $350 bonus after completing your first 50 trips, guaranteed.

    • Save Your Tax Refund. You get a shot at this once a year at tax time. Saving it can be an easy way to boost to your emergency stash. When you file your taxes, consider having your refund deposited directly into your emergency account. Alternatively, you can adjust your W-4 tax form so that you have less money withheld. Then direct the extra cash into your emergency fund.

    • Adjust Your Budget.  Look at your budget and do a bunch of little cuts that you won’t notice individually but add up significantly. Turn the thermostat down a degree or two, clip some coupons, and cancel unnecessary services or memberships. The savings will add up significantly and contribute that your emergency fund.

    • Make Cutbacks.  Cut out those things that you use but you know that you don’t necessarily need. By trimming things that are bad for you, you can find ways to make your emergency fund look good.  For instance, cut back on things like sodas, cakes, high-fat snacks like cookies and chips. Once you cut those things out redirect those funds to your emergency fund.