In my early 20’s, I lived off of ramen noodle packets for a year. You know, the “blue” flavor. Full disclosure, I also had frozen broccoli and dollar tofu to throw in the mix (we’re fancy like that), but this was the meal du jour for a full 12 months.
The decade following the Great Ramen Epoch, my husband and I increased our incomes- I became a full-time interpreter, my husband taught bass guitar and held other jobs- and although we no longer needed to live off of MSG-laden noodles, we never had any “extra” funds…
We didn’t have any savings. We didn’t have an emergency fund.
In retrospect, we should’ve been saving up at least a small $1000 emergency fund while we were paying off debt, as we did run into some relatively minor medical and dental emergencies…
Like so many others, my insurance plan was: Ignore the pain or infection until it became unbearable. I figured, if DIY surgery wasn’t an option and things were getting worse, then that was the real sign that a medical professional was needed.
You don’t even wanna know how I tried to heal a carbuncle by myself…
Hey, being poor means we make tough decisions.
But if we saved a minimum $1000 emergency fund, we could’ve weathered some of the storms better and with less stress than we did…
Like with everything, hindsight is 20/20.
Why You Need an Emergency Fund ASAP
At the time of this writing (April 2020), the world is facing a global, unknown pandemic: a novel coronavirus.
It changed everything- for everyone- literally, overnight.
Only a month into worldwide shut-down, the ripple effects of putting the entire world on hold and decreeing much of the world’s businesses as “non-essential”, is starting to come into focus…
One glaring problem is the average person’s lack of emergency preparedness and funds to combat a time without work or get through an illness- whether it be pandemic or other emergency situation that arises.
I get it. I was one of the “unprepared” for over a decade. Ramen, I had; Any semblance of a safety net, I did not.
With no financial safety net, we find ourselves in a precarious financial place.
In the past few years, there’s been plenty of news stories focusing on the fact that most Americans can’t afford a $1000 emergency- instead, we fall back on taking out more loans to cover anything from a surprise car repair to a medical bill.
And now, with a global pandemic hitting the brakes on every facet of life, the curtain has been pulled back revealing just how many of us are in a precarious financial situation.
Granted, no one was expecting a pandemic. But this shines light on the fact that unexpected events could be right around the corner… and financial preparedness is essential.
By beginning- and building up- an emergency fund, we give ourselves the chance to make it through unexpected crises.
What’s YOUR Emergency Fund Amount?
A popular rule followed by many (and fiercely promoted by financial guru Dave Ramsey) is, “First, save a $1000 emergency fund”. This is everyone’s “emergency fund amount” at the start…
And the name of the game is to just start.
Do what you can to save this (even if it’s $50 a month- every step absolutely counts).
The bigger, more long-term goal, is to save at least six months to a year worth of living expenses to help get through tough times. This larger, more adequate emergency fund should cover all of your monthly bills: Rent/mortgage, groceries, gas, insurance, phones, utilities, and any other essentials.
Everyone’s monthly expenses will look different; The important thing to do is calculate your monthly expenses to know your emergency fund amount.
How much will you need for a One Month Emergency Fund? How much for six months? One full year?
For us, in order to make headway and start saving a comfortable emergency fund, my husband and I cut all unnecessary expenses, including rent, by by living in a RV. You can see a breakdown of our monthly expenses HERE; Our emergency fund is currently funded for six months.
But What If I Can’t Save $1000 Now?
Do what you can. Start small. Keep with your plan to complete your goal.
There’s no magic wand we can swing around to plop an emergency fund in our lap (what a bummer)- so that means we need to build it ourselves.
We started our emergency fund by putting tiny increments into an emergency account. $25 a month.
Yes, really.
Because something is always better than nothing. And $25 is 25 more than our account had before.
If you, like so many others, are having a tough time financially, just do what you can, slowly- but surely- build an account to weather a storm.
There’s so many ways to earn some extra cash, from selling things you no longer need, to creating your own products to sell online.
Here’s some tried and true methods for getting extra dollars in your Emergency Fund:
- Cut Your Expenses, Save the Rest
- Pay Yourself First
- Garage Sales / Online Sales
Cut Your Expenses. First things first: Do a complete and accurate audit of what your monthly expenses are. Down to the cent.
Cut everything that isn’t essential, then put that money in an emergency account.
If you need help budgeting, check out how to make a Cash Envelope System Wallet. This will keep you organized and alleviate the stress and guesswork of monthly budgeting.
Pay Yourself First. When you receive your paychecks, designate a specified amount to your Emergency Fund right away. Pretend like it doesn’t exist- this is “paying yourself first”.
This is a bit of a psychological trick- but by paying yourself first- you can start building your emergency fund now, and it will continue to build with every paycheck.
Sell Products Online. Online sales can take many forms, from selling physical objects, appliances or clothing, to creating and selling intangible, digital products. Granted, creating digital products requires a clear plan and a time investment, while selling physical products is immediate. Just know there are options available.
I create digital products for a small niche and sell them online- using my experience as linguist, interpreter and teacher. On average, these products earn between $100-$200 a month in passive income. Every penny earned goes straight into our emergency fund.
Think about the skills you have and can leverage online to earn extra money; know this is an available option for you!
Whichever methods you decide to use, start building an emergency fund now. There’s no time like the present: Start small, do what you can, and just keep going. Unexpected situations will come up- it’s a matter of when- so insulate yourself as best you can with a financial safety net.
You’ll be happy you did.