Life happens. That is just a fact. One key to avoid a financial disaster is to have an emergency fund. The idea behind the emergency fund or rainy day fund is to have savings in the case of … you guessed it…


Normally when I talk to people about an emergency fund I get the following two responses:

1. Eric, I am literally the safest, healthiest, person in the WORLD! I am basically SUPERMAN without the cape.

I dont need no stinking emergency fund

I dont need no stinking emergency fund


2. Eric, I can barely pay my bills, and you want me to stash money away like a squirrel??!?

Emergency fund? You must be nuts!

Emergency fund? You must be nuts!

First, both are perfectly normal responses. When you are young and healthy you believe you are invincible. There is nothing in the world that can touch you… until it does. In the other camp, I absolutely understand having “more month than money”. Regardless of why you don’t WANT an emergency fund, it is critical to begin building one today.

Why do I need an Emergency Fund?

*Downer Alert Coming*

If you lost your job or was moved to part time, do you know how you would pay your mortgage or rent?

If someone in your family got injured and you needed to take them to the hospital, could you do it?

What if you needed to fly across the country to visit a sick family member, would it be possible?

Unfortunately for the vast amount of Americans, the answer is no. According to CNBC, almost 1/3 of Americans had NO money saved. Speaking truthfully, if you asked me those same questions 6 years ago, my answer would have been no. I was that individual who was just one emergency away from a financial mess. Luckily for me, it never came to that. But that is not the case for so many people.

The answer or at least part of the answer is to have money set aside, earmarked for emergencies. An emergency is NOT I am so hungry I NEED a doughnut! Webster defines emergency as:

an unforeseen combination of circumstances … that calls for immediate action.

Notice no doughnuts mentioned…

Delicious but not a good use of the emergency funds

Delicious but no emergency.

For us, our emergency fund creates a buffer between us and life. When life happens, we are covered. It allows us to make rational decisions when emergencies happens. The emergency fund eliminates one element of stress in an otherwise stressful event.

How much should be in my emergency fund?

Eric now that you scared the daylights out of me… How much should be in this emergency fund?

Great question, but not a simple answer. The honest answer is it depends. Dave Ramsey who is extremely popular in the area of paying off debt using a debt snowball says baby step number 1 is 1000 dollars in an emergency fund. For the same reasons I mentioned above, the 1000 dollars acts as a buffer between you and life while you are tackling your debt. Only after you have paid off your debt, he would recommend a fully funded emergency which is 3 to 6 months of expenses. Others recommend at least a month’s worth of expenses set aside to start out and then move towards 3 to 6 months of overall expenses.

Everyone’s situation is a little bit different. For Michelle and I, we opted to create a mini-emergency fund while we tackled our student loans. We set aside $1,000 for no other reason than it was a round number. However, we both know that this will only cover a mini-emergency but it provides a safety net.

How do I save for an emergency fund?

Eric… If I had extra money I would of already created an emergency fund. There is nothing I can do…

Ahhhh Baloney! There are a ton of ways to build your emergency fund. Here are just a couple:

1. Review your current expenses and cut out the fat.

This is honestly the first place you should check. When Michelle and I really dug into our expenses we quickly realized that we spent WAY too much on drinks from gas stations… This was our daily coffee or soda pick me up. Sure they were SUPER convenient but… at about 5 dollars a day between the two of us it added up to 150 dollars a month! Just cutting out this one behavior over 7 months could have funded our mini emergency fund.

The second biggest expense that we cut out was eating out. This was by far our biggest budget killer.

After a long day who wants to cook??? I get it. But a little sacrifice up front to put your financial house in order will pay off in the end.

2. Sell stuff.

We all have stuff in our homes that we hardly use that is just taking up space. This could be old cell phones, kid’s toys, exercise equipment that is covered in dust…

I know you are going to start exercising tomorrow, right?!?

Look around your house and I am sure you will find a TON of items that you can flip for cash. Depending on how much stuff you have identified you might choose to have a yard sale or sell it online. Facebook has made it SUPER easy to sell online. Jump into a Swip/Swap group for your local area.

3. Get another job.

Ok this not the most exciting of the tips, but it is an option. Nobody likes the thought of doing a second job but in reality this could be a quick way to build your emergency fund and pay off debt faster. A second job doesn’t have to be something you dread doing. In your community you may be able to find a job that compliments your “real” job and allows you to better your skills.

4. Start a side hustle.

I listed this separate from number 3 because although a side hustle CAN be like a second job, it is a bit different because the pay is not guaranteed and varies greatly based upon your hustle. Side hustles are for the entrepreneurial minded who don’t mind rolling up their sleeves. If this sounds like you, here is a great side hustle idea you may not have heard of. Caution it’s a LONG post but detailed! Other great side hustles are: lawn mowing, snow removal, handyman repair services, babysitter, clean houses, rent out a room (AirBNB), coach, tutor, and list is endless.

One side hustle that isn’t FAST but is rewarding is a blog. Have you ever wanted to reach the world and get paid to do it? Blogging might be your side hustle. Here is a guide on how to start a blog.

5. Drastic change in lifestyle.

Of all the ways to grow your emergency this is by far the hardest. Some people come to realize that debt is dumb and will do everything to get out from under it. As a result they have a major shift in lifestyle. This may include things such as downsizing your home or selling your car. As I mentioned, these are MAJOR lifestyle changes but some people would rather make the change now so that they can be set up for retirement sooner. By downsizing your house, you will be able to pay off loans faster and build your retirement fund quicker.

What else do you want to know about Emergency Funds?

These are not the ONLY ways to build your emergency fund, but it does give you an idea of what you could do. What else would you like to know about emergency funds? I am sure there is plenty that I missed. Feel free to leave a comment below with your question.

If you have an emergency fund how did YOU build it? Leave your story in the comments below so others can learn.