The first step in getting that E-Fund is to define what they Emergency Fund will cover, what a 'true' emergency is to you. For our family, a job loss would qualify. A large insurance deductible for a collision is another for us. A $200 pair of pumps is not. Get the idea?
Due to the unique nature of our own personal and business finances in our household, we also had to separate and define between an Emergency Fund and an Essential Emergency Expense Account. No difference to you? No worries then. But for our family the E-Fund is for things that cannot be planned for, and completely unexpected. Our EEE Account is for the specific case of loss of income, due to job loss or a period of continual low income. It's our own built in safety net.
If you are striving to save a DR $1000 Baby Emergency Fund, or several months worth of household expenses, you have to set aside money out of your budget, from one area or another.
How do you build an E-Fund?
One bit at a time.
In order to get $1000, you must first have $500. In order to get $500, you must first have $100. To get to $100, you must first have $20. And in order to do that, you must not spend and save the first dollar. That first dollar requires a change in your thinking. You have to acknowledge that you are not in the best place you could be financially, and that to get where you want to be, you must do things differently.
Ideas to build your E-Fund:
- cut back a little from each of your variable expense categories; even a $5 reduction in groceries per week could mean $20 to start out
- save your pocket change: a few coins could add up to a sum of $10-$20 over one month
- call your cable and/or telephone provider and see if you can temporarily reduce your monthly bill
- OR cancel your cable altogether for 3-6 months; you'll save on the expense and it will encourage you to find alternatively inexpensive forms of entertainment
- have a yard/garage sale: selling unneeded stuff from your home can bring in hundreds of dollars
- have one week where you replace all purchased beverages with tap water for your family, the 'savings' being put toward your fund
- ask for some extra hours at work, or find a temporary part-time job; all earnings go to fund
- make do with things you already have or do without (this one is very hard for most folks)
- challenge your family to have a 'no eating out' month; cook together at home and bank the difference
What say you, readers? What are your suggestions on building an Emergency Fund?