What is an emergency fund?
An emergency fund, also known as contingency fund, is a personal budget set aside as a financial safety net for future mishaps or unexpected expenses. (Wikipedia)
I wrote this post in 2016 and had to reshare again with a few updates! I still feel that having an emergency fund is crucial and will also serve as an investment for your future.
As mentioned in a previous post, my husband and I took the Financial Peace University course online. One of the first items Dave Ramsey recommends is to as quickly as possible save $1000 for emergencies. Most emergencies are under that amount but we reach for our credit card and then our balance continues to grow. If we keep reaching for our credit card, we will never get out of debt. So, by having this emergency fund, we can have some security to be able to pay a doctor bill or an auto repair we didn’t expect without going more in debt.
To build this emergency fund, Dave Ramsey suggests having a garage sale or selling things that could get you a quick return (which also fits with our minimalism journey). If you can’t do that, then I would suggest figuring out where in your budget you could save a few extra dollars and put it aside for your emergency fund. Before too long you will have $1000!
I had some fun with mine the past 2 years by making a jar and using my silhouette curio to make a cute label. Now, the first year (2015), I just used some extra stickers I had from Michael’s Craft Store, craft paint to paint the lid of a pickle jar and my daughter put a bow on top. It worked just fine! I have found if you dress something up it makes the activity more entertaining!
This plan is very simple, starting in January (there’s a calendar to follow) or now, save $1.00 the first week. How simple is that?!? The second week save $2.00 and so on until the 52nd week of the year and you save $52.00! Your grand total at the end of the year will be $1378!!
My first year I took all of my savings and paid off a credit card. While it made me sad to spend it after I just spent the year saving, I felt a great relief!
The second year, I was ahead of schedule by three months! I took everything I could possibly find and put it in my jar. I had been wanting to paint my house (living, dining, entry, and hall) and my husband was taking a week trip and I thought what better time to surprise him. I used my 52 week savings to fund the project. I paid cash! It felt great to have a change to my home and not have to worry about a bill.
Another way to save money is to use this 52 week savings tracker! It's free to download and helps you get started today!!
Incidentally, here are a couple of uses for our Emergency fund in recent years.
In the winter of 2021 (just before Texas froze over) in the middle of the night, our leak detector went off. Besides jolting us awake and scaring the crap out of us, we were alerted to a water leak in our slab. While I dislike using and having to replenish the emergency fund, this was an emergency and warranted using it.
Fast forward to summer 2022. Our pool was showing a weird rust stain. Turns out we had to replaster the pool before it got worse or caused a hole. We turned to the emergency fund again. Not even 1 month later, we had our 2nd slab leak! I walked into the kitchen and water was coming in under our cabinets and refrigerator and I walked out into our garage and it had water standing everywhere. Cue the emergency fund to cover that emergency as well.
Now we are paying our emergency fund back by directly saving for the fund and putting other things off until we replenish our emergency fund.
It is a simple and fun way for me to save money and an effective challenge to be consistent in reaching my goal. You can do this and you will be so happy you did!
If you want to learn more about savings plans and how to become debt-free, I have a detailed post about that right here.
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