The Complete Guide to Building and Keeping an Emergency Fund

AviYonce Scott
Oct 7, 2019 · 6 min read
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Photo by Alexander Mils on Unsplash

Let’s imagine for a moment that you lost your job today.

Your boss calls you into her office and tells you “We’re going to have to let you go.”

And whether you saw it coming or not, the feeling is devastating.

While you’re packing up your office and cleaning out your things, you’re forced to stress about how you’re going to pay rent next month or how you’re going to make that car payment or buy groceries… but what if you didn’t have to?

What if you truly had someone in your corner to back you up?

And no, I’m not talking about your parents or your partner. I’m talking about you and your emergency fund.

What’s an Emergency Fund?

An emergency fund is simply money you’ve put away just in case the worst unexpected scenario happens. And yes I mean the absolute worst!

Completely totaling your car is one of those scenarios. Your roof caving in is also one of those scenarios. Getting fired and losing your only stream of income is definitely one of those scenarios.

Need a couple hundred bucks for that new iPhone upgrade?

I don’t think so, love. Sorry!

The reason for an emergency fund is for emergencies ONLY. You never know what’s going to happen, and that’s what makes living paycheck to paycheck so scary!

How much should you stash away?

When it comes to how much you should have in your emergency fund, I 100% agree with Dave Ramsey that if you’re in debt, you should start with saving a mini emergency fund which is just a $1,000.

I know, I know. It isn’t just $1,000. It’s big chunk of change to save! But what would $100 cover if your rent is due? My point, exactly.

Your emergency fund needs to act as a bridge until you’re on solid ground, and $1,000 will cover a month of living expenses or an insurance deductible for some of you.

But if you’re without debt and support others besides yourself, you may want to think about building a longer bridge.

Think of it this way: the more stable your income is, the less you need to stash away.

Do you have a stable job and have had the same job for the past several years? Great. A three-month $3,000 emergency fund would be sufficient for you.

If you have less stability in a job, or you’re currently taking on post-grad life with a lot of odd jobs, you’ll likely need four to six months of living expenses stashed away in your emergency fund.

Calculating Your Emergency Fund

So here’s where we do a little math, but don’t cringe yet — It’s just simple addition, and a tinge of multiplication.

To create an emergency fund, you have to determine how much your monthly living expenses cost. Your necessary expenses can include any of the following categories & I suggest listing out all your expenses along with their monthly costs.

  • Housing (rent, mortgage, utilities & insurance)
  • Food & grocery (meals, personal hygiene items, & cleaning supplies)
  • Transportation (car payment, insurance, Lyft rides, or gas)
  • Miscellaneous (cell phone bill & internet)

(Notice how I didn’t add Netflix, Hulu, Spotify, or any other expense you might think is necessary, because they aren’t during an emergency!)

Now, after you’ve completed your list, just add all the numbers together, and that grand total equals one month of living expenses!

Depending on how many months you want to be prepared for, you just multiply that grand total by the number of months.

For example, if my living expenses per month come out to $1200, and I don’t have the best job stability, I’m going to multiply $1200 by 6 months to get the grand total of… $7200!

It’s that easy!

But successfully saving that much over a long period of time? Not so much.

Unless you have plan.

3 Simple Steps to Building Your Emergency Fund

  1. Budget! Budget! Budget! (and stick to it)

You’re not going to get anywhere with your emergency fund unless you budget your money and spend smart!

Budgeting starts with one simple task and you’ve already done that! (Hint: remember that list you made?)

You’re going to list all of your monthly expenses, but this time, you’re going to list your monthly income too. And after you’ve deducted all your monthly expenses from your income, you’ll be able to see how much you can save towards your emergency fund.

2. Monthly savings goals are your friend!

Set goals for how much you want to save every single month.

It doesn’t matter if it’s a dollar every day or $100 out of every biweekly paycheck.

The point is that you need to set goals to keep yourself motivated and to keep your emergency fund growing.

3. Leave your future self alone & do NOT touch it.

Yes, I mean YOU. Leave your emergency fund alone! When you take from it, you’re only taking from yourself when you’re actually in an emergency.

Do you really want to stress yourself out even more in the future because you decided to be careless and take from your emergency fund to buy concert tickets?

I didn’t think so! Leave your emergency fund to do what it does best: Protect you!

And that brings me to my final point. Where do you keep such a large sum of money?

Keeping & Storing Your Emergency Fund Responsibly

Your emergency fund needs to be liquid. It can’t be tied up in properties or in your 401(k).

It needs to be somewhere you can get to it quickly and without any penalty. And it needs to have a debit card to go along with it. A simple checking account will do, but not the same checking account that you pay your bills with!

Again, you want your emergency fund liquid, not easily accessible to spend at any time. That’s a recipe for disaster!

4 Quick & Easy Ways to Make $1000 for your Emergency Fund

  1. Punch that clock! A part-time job can do wonders for your supplementing your emergency fund, and this includes Uber, Lyft, and DoorDash. With these platforms, you can even make your own schedule. Two days during the week or a couple hours on the weekend will give you that extra $100-$200 bucks to throw in your emergency fund.
  2. Offer-up is the place to sell your unwanted & unused stuff! Facebook Marketplace is also pretty useful, but it doesn’t really matter what platform you use. Your closet and your garage is a gold mine! You’ll be making extra money in no time.
  3. Use your passions to create a side hustle! If you love to write in your downtime, sell your pieces to online publications and nearby clients! If you know a lot about cars, become the neighborhood’s mechanic. Market & advertise your services online and locally to get some leads and then stash away the cash.
  4. Rent out your belongings! Did you know you could rent out your apartment and your car? With platforms like Airbnb and Turo, you can get paid for letting others use your stuff. This may be a little too invasive for some of you guys, but for those of you who don’t mind, you could easily make $300 a day by letting someone use your car!

Let’s Recap

Are you convinced that you need to start building an emergency fund today? Then here’s what you need to remember:

  • An emergency fund is a stash of money that you build for emergencies only
  • A minimum emergency fund should be about $1000. But depending on your lifestyle & job stability, you might need more.
  • Calculate how much you need in your emergency fund by adding up all of your monthly living expenses and multiplying it by the amount of months you want to be stashed away. (i.e. $1200 in monthly expenses x 3 months = $3600.
  • Build your emergency fund by budgeting, making goals, and leaving your money alone!
  • Store your emergency fund in a place that’s liquid but not easily accessible (i.e. a separate savings account with a debit card)
  • Throw some extra cash at your emergency fund by clocking hours at a part time job, selling your old belongings, create a side hustle you enjoy, or renting out your home or car.

Use this complete guide to build your emergency fund so you no longer have to worry about living paycheck to paycheck or borrowing money. Your future self will thank you!

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AviYonce Scott

Written by

Copywriter & Editor. I write about money, freelancing, and productivity. Award-winning Journalist in-the-making.

The Startup

Medium's largest active publication, followed by +730K people. Follow to join our community.

AviYonce Scott

Written by

Copywriter & Editor. I write about money, freelancing, and productivity. Award-winning Journalist in-the-making.

The Startup

Medium's largest active publication, followed by +730K people. Follow to join our community.

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