7 Super Easy Steps to Start Your Emergency Fund

If you don’t have an emergency fund and are ready to build up one now, get ready to make a few changes. Getting into top financial shape takes work and a real intentional effort on your part to make some necessary adjustments to the way you deal with your money to make this possible.  

When you are in the mindset of saving up for an emergency or paying down debts, it’s a time to live in forced scarcity. We aren’t saying to live in scarcity forever, but when you are trying to accomplish a very clear financial goal, like saving a large amount of money, it’s necessary to operate differently than you have been. Otherwise, you would have your emergency fund funded already! 

Ok, so six months of your expenses is a lot, but you can do this! 

Here are the seven steps to take for starting your emergency fund today. 

1. Establish a routine. Choose one day each month to contribute money into your emergency fund. And then always be sure to do it. According to research, it takes approximately 21 days to establish a routine. Stick to the routine you set so that you can create a good money habit with lasting benefits.   
   
2. Cut back. Chances are, you are spending more money than you need to be on things like groceries and eating out. Review your monthly spending and review where your money is going and which areas you could really cut back. Sometimes, you can’t give anything up, but you can scale back. Some people stop their cable for a few months so they can put that money towards savings instead. Others may restrict the amount of money they will spend on dining out or other discretionary spending categories like clothing shopping and entertainment. 
   
3. Manage your debt. If you have credit card debt, call your provider and ask for a better interest rate. That can save you a bundle.  
   
4. Re-negotiate fees. Did you know you could wind up paying less for a lot of the services you already have just by calling and asking for a reduced rate? Things like your cable and internet bills, auto insurance premiums, and cell phone carriers. Use the leverage of being a loyal customer to allow them the opportunity to reduce your monthly payments. 
   
5. Automate your monthly contributions. If you use online banking, it's very easy to set up automatic regular transfers from one account into your emergency savings account. If that money is immediately deposited into your emergency fund, you won't even have time to be tempted to spend it on something else! 
   
6. Operate with less. People are often surprised by how little they really need to support their lifestyle. Challenge yourself even more and see where else you can trim more than you did on step 2.  Bring lunch to work, spend a little more time cooking at home, or search for coupons for items you regularly buy at the store. Sometimes our own busy-ness causes us to spend more for things than we need to. $1 off coupons really do add up! 
   
7. Purge. Look around your home. There's hardly anyone in this country who doesn't have at least a few things they could part with. Your trash is someone else’s treasure. Have an unused bread maker you will never use? Sell it or donate it!  

Dave Ramsay, national bestselling author and money radio host, has a well-known saying, “Live like no one else now so you can live like no one else later.” 

It’s the good money habits you establish now – like having a fulling funded emergency fund – that will help to set you up on a path for financial success. Good luck!

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Kenneth Klabunde, MS, CFP® is the principal at Precedent Asset Management, a fee-only wealth management firm located in Indianapolis, Indiana. Kenneth specializes in providing comprehensive planning and investment services for clients looking to build, manage and preserve their wealth. Kenneth and I became friends after meeting at a conference and I asked him to share some thoughts as a guest for this site.