In this post, you will learn:
- Emergency Funds: Why You Need to Start One Today
- Emergency Funds: What Are They?
- Emergency Funds: The Benefits of Having One
- Emergency Funds: What the Experts Say
- Emergency Funds: How Much Should You Have?
- Emergency Funds: 10 Easy Ways to Fund Your Emergency Fund
EMERGENCY FUNDS: WHY YOU NEED TO START ONE TODAY!
There are no guarantees in life–except death, taxes and EMERGENCIES! Everyone knows that Murphy’s Law can happen to anyone, at any time.
Life will happen to you, so why not plan for it?
Plan for unexpected emergencies, you say? Uh, yes!
You might not know what will happen; you might not know where or when it will happen, but you know that some kind of emergency will pop-up. Period.
And an emergency or unexpected expense can be extremely stressful when you don’t have an emergency fund.
EXTREMELY STRESSFUL…especially for women (see the chart below) … and that stress can be 10X for a single mother.
But all that stress is avoidable by having a financial contingency plan, otherwise known as the emergency fund.
EMERGENCY FUNDS – WHAT ARE THEY?
So what exactly is an emergency fund?
Well, in simple terms, it’s back up money. Or, money set aside specifically for unexpected expenses, like:
- Car repairs
- Job loss or loss of other income
- Medical expenses
- Funeral expenses, including travel expenses
- School fees
- Pet medical expenses
- Home repairs
The purpose of an emergency fund is to be financially prepared for unexpected expenses.
EMERGENCY FUNDS: THE BENEFITS OF HAVING ONE:
- Provides a financial safety net
- Increases financial security
- Avoid high-interest personal loans
- Avoid payday loans
- Avoid using high-interest credit cards
- Avoid pawning personal items
- Avoid borrowing money from family and friends
- Avoid withdrawing from 401K or retirement fund
- Prevents bad financial decisions
- Keeps stress levels down
- Keeps your spending in check
- Avoid the embarrassment of not being responsible with money
EMERGENCY FUNDS – WHAT THE EXPERTS SAY:
Dave Ramsey on emergency funds:
Suze Orman on emergency funds:
HOW MUCH OF AN EMERGENCY FUND SHOULD YOU HAVE?
Everyone’s situation is different, but here’s where most financial experts agree:
Having some kind of emergency fund
is better than no emergency fund.
Most financial gurus say that the optimal amount to have in your emergency fund is 3 to 6 months’ worth of expenses (that’s everything, your bare necessities + plus your regular spending) so you might need a lot more, depending on your spending habits.
Still, other gurus, on the more conservative side, like Dave Ramsey, preach having $1K in an emergency fund to start. While that might be achievable for a two-income household, $1K might be extremely challenging for the average single mother; instead, I suggest to have at least have $250.00 – $500.00 (TEMPORARILY) in an emergency fund
Why so little?
- It’s easier and faster to save $250 and $500 than it is to save a larger amount.
- Saving a small amount gives you a sense of accomplishment.
- Most single mothers’ emergencies usually fall under the $500 mark, but every situation is different, so think back to your last significant financial emergency and save that amount for your emergency fund.
- Once you’ve saved $250 – $500 in your emergency fund, you will feel more empowered to keep saving.
- Even saving a small amount to your emergency fund, will give you more peace of mind and you will stress less, and that’s always a good thing.
EMERGENCY FUNDS: 10 EASY WAYS TO FUND YOUR EMERGENCY FUND
Now that you know the importance of having an emergency fund, here are 10 easy ways to get one:
SELL YOUR STUFF:
– Sell electronics (cell phones, tablets, radios, and laptops)
– Sell unused furniture
– Sell your children’s clothes
– Sell baby stuff (car seats, high chairs, changing tables, etc. are always in demand)
– Sell ANYTHING you’re not using anymore
START A SIDE HUSTLE
– Sell your artwork
– Make and sell crafts
– Become a personal chef
– Become a pet sitter
– Turn any hobby/craft into a money-making side hustle
Here are a few of my side hustle idea posts:
GET A PART-TIME JOB
Get a temporary, part-time job to stack some cash fast. And, if you don’t like your regular day job, try getting a part-time job in a new field. That way, you kill two birds with one stone.
DRAMATICALLY CUT YOUR EXPENSES (at least temporarily)
– CABLE – Cut the cord on your high cable bill (use Amazon Prime Video Netflix, Hulu and YouTube Red, Fire TVFire TV and Roku instead). You can save a lot of money by switching to one of these services–all you need is an internet connection (and the stick for FireTV Stick and the box for Roku).
– A/C – Stop running your A/C all the time. You’re literally throwing money out the window with NOTHING tangible to show for it. On days, when it’s not that hot, run a fan. Alternatively, go spend the hottest part of the day in the library, where the A/C is FREE.
– CAR INSURANCE – Call your insurance company to see if you qualify for some discounts; if not, shop around with other companies that might offer you a better rate. Even a modest $25-50 per month savings will add up to an extra $300 – $600 a year–that’s enough to start your emergency fund.
GIVE UP COSTLY HABITS
Got bad habits? Habits you’ve wanting to stop? Whether it’s Starbucks, wine or a shopping addiction? Try cutting back (or stopping altogether) and watch your savings grow. Soon, you’ll find that you don’t need things as much or at all.
MEAL PLAN & MEAL PREP
Packing your lunch and cutting out restaurants is a quick way of finding extra cash for your emergency fund. Take it a step further by meal prepping, and you’ll notice that you’re spending a lot less on groceries, too. And an extra added benefit is that you’ll be eating healthier and might drop some extra pounds. Can you say win-win! Check this video out for some tips:
GIVE UP SUBSCRIPTIONS
Got magazine, book or music subscriptions? If so, you could easily save $25 – $50 bucks a month by canceling these subscriptions. Read books for FREE with your library’s selected apps, such as Overdrive (there are others; check with your library to see which ones are used). And, you don’t even have to set foot in the library. You can even borrow magazines, music, movies, and audiobooks. Listen to music for free with YouTube playlists–or create your own. You can listen as long as you like for FREE.
SWITCH CELL PHONE PLANS AND DON’T UPGRADE YOUR PHONE
Got a hefty cell phone plan that’s up for renewal? Well, don’t renew; instead go prep-paid, baby. Why? Well, for one, your cell phone bill stays exactly the same every month. Two, you can pre-pay your bill for several months in advance by adding a little extra on your bill every month. The BIGGEST saver, though, is in keeping your current phone for another year or two. With new, brand-name phones costing over $1K, your money is better spent on your emergency fund.
USE YOUR TAX REFUND
If you get a tax refund, use a portion or all of it to fund your emergency fund. Do you really need that STUFF that you’re dying to get over an emergency fund? Think about it? If not, fund on with your bad self:-)
GO ON A SPENDING FAST
If you don’t have an emergency fund, but you have a shopping fund, we need to talk? Savings and emergency funds come first; then, once your finances are in order, you can designate a specific amount each month to spend. But you need to decide if being financially stable and secure is more important than shopping –at least temporarily.
Having an emergency fund means having peace of mind. If you’re ready to stop stressing over money, then start by getting a financial check-up. Emergencies are going to pop up, but having an emergency gives you the peace of mind that you don’t have to beg, borrow or steal to deal with life’s unexpectedness.
You got this!
Serious about getting your money together? Read these posts:
Thanks for reading!
And, as always, keep it real and drama-free
Ms. No Single Mama Drama