5 Easy Budget Tips to Set Aside $1,000 for Emergencies
A 2018 Federal Reserve survey reveals four in 10 adults would have to borrow or sell something to cover a $400 emergency. And a third of us are a moderate monetary setback away from serious financial hardship.(1)
Can you imagine having to sell your couch to fix your car? Where would you binge watch your favorite dramadies? Or what about that awkward call to get a loan from your parents—when you know you’re supposed to have this adulting thing down?
It doesn’t have to be that way! There’s a better way, and it’s called an emergency fund. Increasing the buffer between you and those “why me?” expenses relieves some of the stress that comes with an unexpected emergency.
What Is an Emergency Fund?
An emergency fund is that buffer we just mentioned. It’s money you’ve saved to financially save you when the surprises of just being a living, breathing, human person hit hard. To be ready for these moments, you start with what we call Baby Step 1: a beginner emergency fund of $1,000.
How to Budget for an Emergency
1. Create a budget.
Writing down your income and outgoing expenses is a powerful first step toward getting ready for emergencies. A budget shows where you can make adjustments in order to free up money for savings. You never know how much extra money is in your budget until you make one.
2. Have a “savings” line item.
When you set up your monthly budget, add in a category marked “emergency fund” to your “savings” line item. Then add the amount you want to sock away each month. That account will gradually build up and be ready to cover you if your car battery dies or your A/C goes out in the middle of the summer. Consider auto-drafting this amount straight from your paycheck so you don’t miss or accidently spend it.
3. Put your excess money in your emergency fund.
Once you’ve filled out your budget and everything’s accounted for, you may have some leftover money—which is more refreshing than fresh-squeezed lemonade in muggy mid-July. But you can’t leave that excess hanging. You want what we call a zero-based budget, where every single dollar has a job. (EveryDollar—get it?) Give any additional money that’s not needed in other budget categories the valuable job of increasing your starter emergency fund.
4. Trim your expenses.
See where you can tweak your spending to save money. Go with a different cable package (save around $20 a month), clip grocery coupons (save $20 a week), or sign up to receive restaurant deals via emails (save $5–10 per visit). Those alone add up to more than $100 a month.
5. Track your spending.
Staying on top of your transactions is important because it helps you know when your spending is getting too close to your budgeted amount. If you see that you’re halfway through the month and 90% of the way through your restaurant money, you’ll know it’s time to trade the appetizer menu for those leftovers in the fridge.
Using a budget is the best way to save money for emergencies—but it’s not the only way.
How to Give Your Emergency Fund a Quick Boost
If you want to increase your beginner emergency fund contributions a little faster, here are two ways you can make that happen.
Earn extra income.
Nabbing a side job speeds up your starter emergency fund progress—as long as you focus the money toward your savings goal and not your vintage electronics collection. (Put your search for rotary dial phones on hold until you’re more financially secure.)
To earn and save money, you could start a small lawn-care business, drive for a rideshare service like Uber or Lyft, or sell your homemade crafts on Etsy. Use those natural skills to fill your emergency fund.
Price-shop your fixed expenses.
Compare prices on things like car insurance and gym memberships. Set aside a couple hours to research or call customer service. Chances are, you could get the same service you’re using now for a lower cost somewhere else—or use those newfound lower costs to negotiate with your current services. If you find out you already have the best price, ask a service rep if they have smaller packages such as limited versus unlimited gym access.
Let’s face it—you need an emergency fund. With the EveryDollar budget, you’ll gain a powerful tool to help you save money. Taking the first step toward less stress in times of duress is only one budget away!