Hi friends! If you are new around here, once in awhile I like to talk about finances. A few years ago my family was in over $40k in debt! Paying off our debt was life changing and I am passionate about helping others to do the same so once in awhile I like to share some money tips. We worked really hard and skimped to pay every penny of that off. If you’re interested, here’s the post where I talked about how we did it (one of my most popular posts to date!).
Once our debt was all paid off, it was time to save for our emergency fund. We are following Dave Ramsey’s baby steps and here’s what he suggests:
So steps one and two were done, but we were tired. We were super strict with our paying off debt years and sent every extra penny towards towards debt that we needed a break. We took a year off and guys, it was niiiice having some extra money! Honestly, that probably wasn’t the smartest move, but it’s what we did and it felt right during that time in our lives. Then something changed. Instead of it being about the money and not wanting to just sit on it, we got a big why and we saw our emergency fund as launching pad for a bigger life we want to live. So here’s some changes we took that put our savings into overdrive that would work for anyone:
figure out your why
Sit down with your significant other and decide why you want an emergency fund. My husband and I are making some big, scary, and exciting changes to our family’s lives at the end of this year (details coming soon!). Once we got on the same page about it, we knew we needed an emergency fund and figured that the more money we saved the better!
You can look at an emergency fund as an umbrella for when life rains- job loss? Broken furnace? Major injury? You can afford to fix these issues quickly with cash because you have money in a savings account. They still suck, but with money waiting around for these urgent, necessary expenses, they sting less.
My favorite part of having an emergency is that the money will give you peace of mind. You now have an insurance policy against the unpredictable so your mind is freed up to be creative, live in the moment, and not worry about what you don’t know is coming.
Mostly, money is freedom. Building your emergency fund means you are one step closer to living a wealthy life where you can give freely and be your authentic self. #goals
calculate how much your monthly expenses are
If you’ve been living on a strict budget, this part is easy. All you do is add up your monthly expenses. Here are some categories to consider. Add up everything you couldn’t cut easily if you were in a major money bind:
- Auto /Transportation
- Child Care
- Cell Phone
- Groceries / Dining Out
- Gifts Given (Christmas & birthday gifts, etc.)
- Household Maintenance
figure out what your final emergency fund should be
If you have two wage earners and you both have steady incomes, you just need a 3 month emergency fund. If you work for yourself, have one wage earner, or work on commission, you probably need a 6 month emergency fund. We decided to save up a 6 month emergency- so my husband and I could both not have a job for 6 months and we would have plenty of cash to see us through. Take your monthly expenses from step two (ours is $2,000) and times that by 3 or 6. Our total came out to $12,000.
make a goal
When do you want to have your emergency fund all saved up? Make a goal and post it on your fridge. I have a thermometer that has my goal date that I can fill out as I go. It’s super motivating to see the progress and is a great way to keep your goal fresh on your mind.
remember your why
To help us remember WHY we are putting all of our extra money towards savings, I made a mood board of how I envision our lives after we have an emergency fund saved up. Having the pictures on the fridge make me smile every day and more importantly keep me motivated!
If you want to make a mood board with your why, here are my suggestions-
- go on Pinterest or Google Images and save any images that show your why
- use picmonkey.com to arrange your images into a collage. This is a free website that’s super easy to use!
- print it out and put it on your fridge
Whenever I need to get inspired, I read. My favorite book on this subject is Dave Ramsey’s Total Money Makeover. It’s an easy read and I promise it will get you motivated! I have a few books that I can say are life changing and this is definitely one of them.
throw all of your extra money towards your savings
It is now officially time for action! Use whatever extra money you can and put it in your saving’s account. Below are the ways I found the cash to create our emergency fund. It took us a little less than 6 months to save up our $12k emergency fund. Here are some tips so you can do it too!
I paid for things in cash
Every two weeks, I got cash out of the bank and put it in envelopes. $50 for a weeks worth of groceries. $80 a month for Christmas. $20 for dates/eating out. Paying cash really helped me stay on budget! If there wasn’t enough money in the envelope, I couldn’t get it. At the grocery store, I would keep a running amount on my grocery list of how much each item cost. If I went over my $50 allotment, I put the item away. I was hard core 🙂
I lived on a written budget.
To keep track of my expenses, I made an Excel spreadsheet and listed out how much we made and the subtracted all of our bills. I then subtracted out budgeted items like groceries, dog food. I then subtracted out remaining balance to the emergency fund payment for that month. After that, there wasn’t any money left. Every penny went to a bill, a budgeted item, or savings.
At first I hated the budget, but I have come around to loving it. Why? Because it is freedom. It’s a plan so that you are in charge of your money and you tell it where to go. If I wanted to run a 5k, I would put it in the budget and then I didn’t have to worry about not having enough money for it. I was in charge!
The other thing I love about a budget, is it helps you out for the next year. At first, I had lots of “surprise” bills- the car registration, tax bill, and 3 birthday presents were all due at once so I was scrambling to cover it. Now, I can look at last year’s budget for the same month and get a really good estimate on what the electric and gas bill will be and what annual bills will be due.
I cut back majorly
This part was painful, but everywhere we could cut back, we did. We bought cheap toilet paper, we ate at home for most of our meals, we brought bagged lunches to work, we found the cheapest gas, we didn’t buy unnecessary clothes or makeup or anything really (sob!). Wherever we could, we spent less or nothing. We got creative and borrowed books and movies from the library. Our dates consisted of going to the park to throw the ball for the dogs. We didn’t go to a gym to work out, but ran outside. Pretty much, we became the cheapest people around.
I reduced my bills where I could.
By calling our phone provider, I got a better rate. I went from paying for insurance monthly to switching companies and paying every 6 months to save a ton of money. We did our best to turn off lights to save on our electricity bills. It was painful to sit on the phone and ask for better rates (and I was told no a lot), but it saved us some money!
Every Extra Penny went to Savings
When we saved money on the prior two steps, the extra went to the emergency fund.
I got creative.
Every time we needed to buy something, we thought do we really need this? If the answer was yes, we thought of different ways we could get it. Thrift store? Craigslist? Can we get by with borrowing it once? One time, our vacuum broke. Going without a vacuum is not really an option with two dogs who shed. We brainstormed, but couldn’t think of anything. Then one day my husband came home with a Dyson vacuum! His best friend was getting a new vacuum and so he gave us his old one. There were a few parts that weren’t working, so we replaced those for about $50. That vacuum is the best vacuum we have ever had! If we would have had to buy if new, it would have been almost $400!!! So get creative and think twice before you run to the store.
I transferred my savings into a savings account
My credit union is awesome and lets you have as many savings accounts as you want. I opened up extra saving accounts so that I could easily transfer over the savings from the checking account on an app. Having the separate accounts was helpful to ear mark it and see what was saved for what instead of just seeing a ton of money in my account and wanting to spend it.
I brought in extra money.
My husband worked extra and mowed my mom’s lawn. I sold clothes on eBay. My blog makes a little money. The extra money was super helpful to accelerate our savings.
I did it little by little.
I know this list is long, but I did it little by little. The quote above “Little by little, a little becomes a lot” was my motto through this whole thing. If I saved $5 grocery shopping it could be thrown towards savings. Sure, that seems like nothing when you are trying to save $12,000, but little by little, that extra $5 here and there really adds up! I didn’t cut my bills down all at once either, but monthly I would call one company and see what we could cut. Start where you are and get a little better every day.
To help you start your emergency fund, I have created a two page freebie. The first page is a worksheet that you can fill out to figure out why you should start an emergency fund, how much you should save, and your goal date. The second sheet is a blank thermometer so that you can put it on your fridge and start to see your progress! #seeingisbelieving
Just fill out your information and the pdf link will be emailed directly to you! Happy savings!
I hope that this post has been motivating for you. My number one goal is to help you become financial free and my fingers are crossed that this will help you take the next step in that direction. I’d love to hear how your emergency funding is going in the comments!
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