Building and Maintaining an Emergency Fund

An emergency fund is money set aside for unexpected expenses such as car repairs, medical bills, or loss of income. Having an emergency fund can help you avoid debt, stress, and financial hardship when life throws you a curveball.

To get started, decide how much money you need to save for your emergency fund. This will depend on your income, expenses, and personal situation. A good rule of thumb is to have enough to cover three to six months of your essential living expenses, such as rent/mortgage, food, utilities, and insurance. To calculate your goal, you can use a budgeting app, spreadsheet, or paper to track your income and expenses for a few months. Then, multiply your average monthly expenses by three or six to get your target amount.

Consider taking these steps to start building your savings:
•    Set aside a portion of your income automatically.
•    Save any extra or unexpected money that comes your way, such as your tax refund, bonus, or a raise.
•    Find ways to reduce your spending by reviewing your budget and identifying areas you can save, such as entertainment, subscriptions, or dining out.
•    Find ways to earn more income by working overtime, getting a side hustle, selling items or taking on freelance work.

Keep in mind that reaching your emergency fund goal can be a moving target. Odds are that as soon as it is funded, you will need to use it for something. Instead of being dejected about this, be glad that you were financially prepared and start the process of building the fund again.