How To Build An Emergency Fund

No matter what your finances are like or what stage of your life you are in, it is so, so important to have an emergency fund ready in case the worst happens — no matter what "the worst" might be for your particular situation. Unfortunately, how to build an emergency fund is something we rarely learn about in school, event though, as Chelsea Fagan of The Financial Diet puts it, "Having an emergency fund is pretty much one of the fundamental tenants of being a functional adult." Whether you're a recent grad or someone well-established in your career, it's equally important to know how to not only maintain a budget, but also how to save money and create an emergency fund.

Because, unfortunately, we can't predict the future: People lose their jobs, come down with medical issues, or have family needs that sometimes prevent us from working. Emergency funds are worth having even if you don't deal with an actual "emergency." Major life events like adopting a pet, moving to another location for a job, or becoming a parent might require an upfront investment — so having the funds necessary to make that investment readily available can make a big difference.

Basically, no matter who you are, an emergency fund is always good to have. (There's a reason the essay "A Story Of A F*ck Off Fund" went viral at the beginning of 2016.) If you've never created an emergency fund before, or are new to managing your money in general, it's great to check out tips and suggestions from people who are financial experts. While not every tip will work for every person, they can be a great starting foundation for how to create an emergency fund that works for you. Here are a few ideas to get you started:

Track Your Expenses And Your Spending

According to Lars Peterson at U.S. News & World Report, before you determine what you can put into your emergency fund, you need to sit down and figure out what your monthly spending looks like. Keeping a close eye on your rent, utilities, travel expenses, grocery budget, and so on is important no matter what; however, it can be especially enlightening when you're determining what you can "save" from yourself without going hungry or missing a payment. It also helps give you an idea of what your expenses might look like if you lose income — how many months of rent will your emergency fund cover, for example?

Have Automatic Deposits Taken From Your Paychecks

As Chelsea Fagan explains at The Financial Diet, if you set up your paychecks to automatically transfer a percentage of each check into your emergency fund, you aren't tempted to spend what isn't there. As she puts it, "Automating your savings means you never 'see' that money, which subsequently makes it sting a little less." Because let's be honest: Saving money isn't easy, and it's especially tempting to spend it when it's a simple card swipe away.

Save Your "Extra" Money Instead Of Spending It

You know that rush you get when your family member gifts you some holiday money, or your boss surprises you with a nice bonus? It feels great — and, likely, makes you want to spend it right away on a treat, because hey, it's "extra" money. If you're trying to create an emergency fund, however, it's a really good idea to put that "extra" money away instead of burning through it.

As Trent Hamm points out at The Simple Dollar, "If you want to have a savings account for big splurges, that’s great – start a 'splurge fund,' too, if it makes sense for you. It’s important, though, to just leave the emergency fund completely alone until you need it." It's super, super tempting to see "extra" money as spending money, but putting it toward your emergency fund is almost always the better financial move.

Set Short- And Long-Term Goals

Giving yourself specific goals and motivations can often be a good way of getting yourself to follow through on things, and saving money is no exception. As Spencer Tierney explains at Nerd Wallet, setting a monthly goal "will get you into the habit of saving regularly and will make the task less daunting." Monthly — or, depending on your pay schedule, even weekly or biweekly — goals can feel much, much more manageable than picking a number for the entire year.

Take A Inventory Of Your Belongings And Sell What You Can

Depending on your income and budget, it might feel really overwhelming to find "extra" money to put away into savings. A great way to find some more money to start a nest egg is to inventory everything that you have and see what you can sell it for. You can list items on websites like eBay or Etsy, as well as sell things to local consignment and antique shops. You can also have a good old-fashioned yard sale. While this isn't necessarily a monthly contribution to an emergency plan, it can be enough to get you started.

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