How to Build an Emergency Fund When Money Is Tight

How to Build an Emergency Fund When Money Is Tight

How am I supposed to create an emergency fund when there’s no money left at the end of the month?

Have you ever asked yourself this question? Saving money can be a challenge no matter how much money you make. There will always be one more unexpected bill, one more item to buy, or one more payment to make.

Yet, creating a cushion, or an emergency fund, is one of the smartest financial gifts you can give yourself. Here are some tools to get you started.

1. Change your mindset.

You may need to cut back on some spending. Don’t think of saving as deprivation; instead, consider it preparation for life’s ups and downs.

2. Pay yourself first.

If you wait until everything else is paid, your money will be gone at the end of the month. Set aside a portion of your paycheck at the beginning of each month. Try for 10%, but even a little adds up over the long haul.

3. Set up an automatic deposit into a special account, before you even get your paycheck.

Out of sight means out of mind. You probably won’t even miss it. But your emergency fund will grow each and every paycheck. It’s like putting pay yourself first on autopilot!

4. Aggressively tackle your debt.

Add extra money to the minimum payments until the balances are all paid off. No debt means peace of mind and more money to work with.

5. Once the debt is gone, keep making those payments to your emergency fund.

You were doing fine without that money to spend before. Why waste it now? Put it in your emergency fund and you won’t need to use your credit card the next time a money emergency occurs.

6. Curb spending by enforcing a 24-hour waiting period.

If you’ve ever wondered what you were thinking when you bought an item you know the problem. Even walking out to your vehicle in the parking lot and asking yourself if the item is a need or a want can cut down on your impulse buys. You’ll be surprised how much money you’ll have for your emergency fund.

7. Leave your credit cards at home.

Studies have shown that plastic is much easier to spend than actual cash. So if you shop with cash only, you will not go over budget. Once the money is gone, it is time to head home.

8. Throw some fun and entertainment into the budget.

Even if it is only a trip to the ice cream shop, you have to allow yourself some fun. Turning saving into a chore will only backfire.

9. Where you keep your emergency fund is as important as building it.

You don’t want to spend it on non-emergencies. Set up a special account, perhaps even at a different bank. Making the money harder to withdraw will help you think twice about what an actual emergency is.

Get the interest you deserve.

10. Set mini goals and reward yourself when you reach them.

Start by aiming to save $200. When you reach that make $500 your next goal. Then $1,000. It is much easier to work toward a goal than the vague notion of “saving more money.”

When you reward yourself, your determination grows to reach the next goal.

11. Remove temptation.

Quit window shopping. At the mall or online. Don’t look at the sales ads if you can’t pass up a bargain, even if it is something you don’t need. Don’t go new car shopping if you know you can’t afford another payment.

Marketers specialize in finding ways to separate you from your money. Don’t make it easy for them.

12. Once your emergency fund starts growing, recognize it’s value.

You know that life is full of unexpected financial challenges. Car repairs, home repairs, unplanned medical bills. You know your emergency fund will be there for you when you need it.

Don’t overuse it or treat it carelessly.

13. Enjoy compounding interest.

Look for a savings plan that gives you interest and the higher the better. Your fund will grow that much faster.

But I Don’t Know Where to Find Extra Cash

Maybe your budget is so tight that you couldn’t squeeze an extra nickel out of it no matter how hard you tried. So where will you find extra cash for an emergency fund?

Let’s explore some of the opportunities that could work for you.

Cut food costs

Perhaps you’ve cut your grocery budget to the bone. But have you really? Read my detailed article on how my husband and I only spend $250 a month on groceries (without couponing).

Related article: 10 Simple Ways to Keep Your Monthly Grocery Budget At $125 Per Person

Use a cash back credit card

Are you sure that you’re using the right credit card? If you’re not getting cash back, you’re giving away free money that could be going to your emergency fund.

Most of us use our credit cards almost every day. Buying everything from snacks to 70″ TVs. Why not get a free discount when you do?

The best way to find the best cashback card for you is to compare offers. You could be creating a monthly source of income and never do another thing to earn it!

Or get a credit card with a lower interest rate

Sometimes you can’t help it. You have to pay the credit card minimum. If so, you could save money by reducing your interest rate. Especially if your credit score is above 650.

Create a second income stream

Maybe you really want to give that emergency fund a boost! A little here and there isn’t enough for you. Then you might want to start a side gig. Here are some side gigs to consider that can earn you extra cash.

Creating an emergency fund is possible at any income level. As the fund grows, your peace of mind will, also.

We all know that emergencies do happen, and being prepared for it can make all the difference between weathering the storm and being overwhelmed. If you don’t have an emergency fund yet, today is the day to begin building one.

What are your tips on how to save an emergency fund when money is tight?

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