The Importance of an Emergency Fund

This month has been bad for a lot of folks. Clean up continues from the hurricanes in Texas, Florida and especially Puerto Rico. Here in California we are starting the long road to recovery from the devastating fires. And, on a personal note, my siblings and I laid our father to rest.


I heard recently that we can expect as many as four emergencies in the course of a year. Given that many Americans now live paycheck-to-paycheck, that is not welcome news. But there is something you can do and that is to build an emergency fund. I had to dip into my emergency fund this month for several unexpected items: last-minute airfare, food, long-term parking, tips for service providers (it was news to me that some religious officiates expect tips), accommodation and miscellaneous expenses that are not part of your normal budget.

People have lots of excuses for not prioritizing their emergency fund. And that’s the thing, it’s your fund for you! Starting an emergency fund does not have to be overwhelming and add stress to your limited resources. Here are a few tips to make it easier:

Start small. Even if you can only put away $20 per week, get started. That $20 per week equals $1,040 by year’s end. If not $20 per week, how about at least $20 every payday.

Drop the habit. My cousin stopped smoking and has saved over $480 in a very short time.  Look at your daily habits and see what you can cut out. Smoking is a big one and claims that the average cost of a pack of cigarettes is $5.51 and as high as $12.81 in New York. If you drop one pack per week, you are saving over $286. What’s your habit that is costing you too much money?

Make it automatic. Electronically deposit a fixed amount or fixed percentage of each paycheck into a designated savings account. If possible, make this an account not tied to your checking account. The idea is that this savings should be harder to access.

Pocket change adds up. Create a family change jar and have everyone drop their pocket change into the jar at the end of each day. You’ll be amazed at the end of the year when you count the change! Deposit this into your savings account.

Designate found money for savings. If you get a tax refund, a work bonus, or another type of windfall, put this into your emergency fund.

Setup an account with an online retailer. Sell stuff you are no longer using. Of course, these have to be items that are in good condition, work properly and that people want. Consider books, textbooks, collectibles, electronics, nice clothes, games, toys, etc. Just anything you are tired of seeing around the house that someone else might be willing to pay for.

Having an emergency fund saved me this month. It took me a long time to create the fund and I used a combination of saving from earned income, selling items, and side gigs. Ultimately, it proved its importance and made a stressful time much less stressful.

As an independent Certified Financial Planner™, I can help you decide where and how to save. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #badhabitscost #smokefree #savings #emergencyfund #startnow #juststart #stressfreesavings