How to save up an emergency fund

This is the final part of a series on emergency funds. See the end of the post for the other parts.

You know that you need an emergency fund and why, what to do with it once you’ve got one - how much to have, where to put it, and when to use it - but if you’ve still got one burning question left, you’re not alone.

How on earth am I going to save up that much money?

Personal finance advice || How to save up an emergency fund by The Wiser Miser. Here's how to save money for your emergency fund.

The good news is that you can do this - even if you don’t have tons left over each month. It will just take a little more time. So without further ado, let’s look at a few ways people have successfully used (myself included) to save up a big chunk of change:

The Windfall Method

This way of saving money is a classic for a reason - it works. If you get a large (or just larger than usual) amount of money sometime, use this money to put towards your emergency savings. Right now you’re probably doing a version of this, but it’s going towards vacations or other fun stuff - or just getting eaten up by life.

Examples of the windfall method include:

  • Tax refunds

  • Bonuses at work

  • Gifts and inheritances

  • Extra paycheck months

The next method is to give yourself a challenge.

The Challenge Method

The challenge method is about...challenging yourself to save the money by whatever means possible. Sorry, no sexy spin on this - it’s exactly what it sounds like. This is where you buckle down for a short period of time in service of a larger goal. If you’re fortunate enough to have enough money to cover your expenses each month with enough left over for even a few luxuries, this method can work great for you.

Remember that when we’re first starting out, your goal is to save just $1K. You can totally get there!

  • Look at your spending. Where can you cut back for one or two months? Not forever, just for now. This is made much easier by budgeting.

  • Sell your stuff. Anyone else guilty of having a basement and garage and closet full of stuff they don’t really use anymore? A lot of this stuff in my house just gets carted to the nearest human-rights-friendly thrift shop or shelter, but some of it ends up on Craigslist, Facebook Marketplace, or eBay. That’s money, honey! This can be overwhelming to think about, so set yourself a half hour timer to look around and make a list of what might be salable, then another half hour to start dealing with it at another time. A yard sale is a time consuming but profitable idea if you’re in the right location and season.

  • Hustle. When you were in college, what did you do to make ends meet? You were so scrappy! You made it work! Obviously, your life has changed since then, your expenses are up - but I bet there’s something there you could go back to, temporarily, to get some extra cash so that you can sleep better at night. When I was in college I cleaned toilets and hung out with other people’s dogs. One of those is a lot more pleasant and pays better than the other. Is it a pain for me to do that again, now that I have a family and a dog of my own? Sure. Is it doable for a month or two, especially if it means making some savings goals? Absolutely. Alternately, if you have a business or side hustle, kick it into high gear for a little bit to get to this goal. Ask your existing clients for referrals and offer them a little something in return, run a flash sale - you know what works for your biz.

Next up, the tried and true “put it in the budget” method.

The ‘Put it in the Budget’ Method

The last method is the slowest method, but arguably the easiest. It’s also the best method if you don’t have any windfalls coming and/or aren’t able to do a challenge for some reason. This is also the method I recommend for saving up your big emergency fund - that 6+ month behemoth we talked about last time. This method is great for the long haul, but also combines well with other methods to boost it.

The gist of this method is that you set aside some money every month towards your goal - in this case, an emergency fund, though it works for any financial goal - until you reach it. You can approach this a few different ways:

  • Same amount every month. If you put aside the same amount every month, it has the benefit of reducing your decision fatigue, making your planning for the rest of your budget easier, and arguably the best part - you can set up an automatic transfer and not touch it again. Pick an amount that is a little uncomfortable but won’t leave you with unpaid bills, then set it and forget it. This is the method I recommend, strongly.

  • Different amounts based on month. Doing a different amount each month based on how that month goes has the benefit of adapting to each month’s changes. The other side of that, however, is that it’s very easy to not save enough this way. If you do not use a zero-sum budget it’s arguably near impossible to say with confidence how much money you actually can put towards this in a given month, which leads to underfunding (or overfunding and then panicking). This method works, but it takes longer and causes you more stress.

When you use a zero-sum budget (like my bff, You Need a Budget), you will be able to more clearly see how saving a specific amount each month will impact the rest of your budget, so it will become much easier.

The best way to save up for something big like an emergency fund (or a big vacation, or to pay off a debt) is to combine these. Get some awareness of your overall financial decision by using a budgeting tool, make some room consistently for your goal (the ‘put it in your budget’ method), do short-term challenges to boost it (the ‘challenge’ method), and if you get a bonus or tax refund, throw it at the goal (the ‘windfall’ method). The key here is that when you think about your money, you want to have clear priorities. While you have a lot of spinning plates, financially, you should know what your primary goal is after your basics are taken care of. As we talked about in the first post in this series, if you have a variable income through self-employment or commissions, or if you have other consumer debt like credit cards, building an emergency fund is your first priority.

That’s all for this series on emergency funds - for now. Are there questions that you have that I haven’t answered? Let me know in the comments!

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