We all know that money can’t buy happiness but it sure can cause a lot of stress if you don’t have any! No matter what your financial situation, every family should have an emergency fund and most financial experts agree that you should start with a minimum of $1,000 to get you started.
If you have read Dave Ramsey’s Total Money Makeover (Totally recommend it by the way. I’ve read it several times and it has completely changed my outlook on money), he strongly emphasizes starting with a $1,000 emergency fund.
Before you start saving though, you need to understand what your emergency fund is.
What does your emergency fund cover?
Your emergency fund is not there to cover an “emergency” vacation or new pair of shoes. It is there for a true emergency. Just last week we had 2 tires blow out on our car. That was an expensive surprise. Luckily, we had our emergency fund in place so we didn’t have to put that on a credit card and then deal with all the fees and interest that goes along with that.
Your emergency fund is there to cover:
- unexpected car repairs
- unexpected medical bills
- emergency travel (for a true emergency)
- unexpected home repairs
- other urgent and needed expenses
What does your emergency fun NOT cover?
Your emergency fun is not meant to cover expected expenses. Your car registration is due the same time every year. That requires budgeting, not an emergency fund. Christmas is on December 25th every single year. Again, that’s a budgeting issue, not an emergency fund issue.
Knowing the difference between what you should use your emergency fund for and what you shouldn’t can help prevent you from spending it before you really need it.
How do you save that first $1000?
Saving the first $1,000 of your emergency fund can feel overwhelming. It can be done though, no matter what your income is.
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Create a budget
You can’t save any money until you know where your money is going. Write down every single expense. It helps to look back at what you have spent for the last several months and average out anything that isn’t a set expense.
Cut your budget down to the basics
Now that you have a budget, take an honest look at it. Not having an emergency fund is a precarious place to be in so it’s worth making a few sacrifices to get that in place. Are you paying for TV service? Cut that out and opt. for a cheaper streaming service like Hulu, Netflix, or VidAngel instead. VidAngel is my new favorite because you can watch a great selection of movies for only $1 a piece. That’s way cheaper than paying for TV.
Are your kids in extracurricular activities? Have them each cut back to only one activity each. Eliminate any extra services that aren’t absolutely necessary. Sometimes just taking a good look at your budget can help you cut things out. My husband and I sat down to create a tighter budget and found we were accidentally paying for 2 Netflix subscriptions! I have no idea how we didn’t catch that but that was money in our pocket as soon as we realized it.
Get your grocery budget under control
Most people have the most leeway in their grocery spending. Make a meal plan and stick to it (this printable menu plan can help you get started). Do as much prep work early in the week as you can so you aren’t tempted to eat out. These chicken dump freezer meals take less than an hour to make a week’s worth of meals and are super affordable.
Look at what you can sell
You probably have things in your home that you aren’t using that could help you get some extra cash for your emergency fund. I’d rather have a nice financial security blanket than a houseful of stuff that I don’t need. Try selling old toys and clothes on Facebook sale groups or Craigslist. For more unique or higher end items list them on Ebay. I cleared out all of the old toys my kids weren’t playing with anymore just before the holidays and pocketed over $100 for less than an hour’s worth of work.
Look for ways to earn more
If you have cut everything out of your budget that you can than it’s time to look at how you can earn more money. There are some great work at home opportunities if you just want a side hustle or you could turn it into a full-time work at home job. Check out our list of 20 real ways you can earn money from home for some ideas.
Sell a car
If you have done all these things and aren’t happy with the progress you are making on your emergency fund, it may be time for some extreme measures. If you have two cars, consider selling one to give your emergency fund a boost. Going with one car can be challenging (trust me, we’ve done it before) but it will be worth it in the long run to get yourself on better financial footing. We have even sold our home before to help build up our savings so you may want to reevaluate your housing situation to see if there are ways to cut cost there.
You’ll probably be surprised at how quickly you can come up with the first $1,000 of your emergency fund. Once you have that first $1,000 you’ll be amazed at how much less stressful all those little emergencies will be.
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