Life is full of surprises and a lot of them are not pleasant. Car transmissions fail. Water lines in your house burst. Life comes at you fast sometimes.

That’s why everyone needs an emergency fund. That’s a little rainy day stash of cash you set aside and then Do.Not.Touch! It’s like the little housing enclosing a fire alarm. “Break glass in case of emergency.” But only in case of an emergency.

This isn’t a till to dip into the buy that fancy new power tool you’ve had your eye on. You don’t use it because you’re short of cash, but want to get your nails done. Those are not emergencies. This is money set aside for life’s unexpected calamities, and that’s it. An e-fund gives you peace of mind, keeps you out of debt, and helps you remain prepared for chaos.

According to the Federal Reserve, 36% of all U.S. adults could not pay for a $400 emergency bill with cash. Don’t be one of them. Get yourself an emergency fund today!

Why we’re covering this:

• Because a large percentage of adults can’t afford even a small emergency without creating a financial disaster, establishing an emergency fund is essential.
• You first goal should be to set aside $1,000 strictly for emergencies, which some might feel is impossible since they have trouble paying their bills as it is, but it is completely doable.
• By performing a few simple steps, you can create something out of nothing and have your first e-fund established to help your prepare for the unexpected.

So how much should you set aside? Personal finance guru Dave Ramsey recommends $1,000 is a good starting point, and I agree. While the rule of thumb says three to six months of expenses, you can’t run before you can crawl. You have to start somewhere and $1,000 is the first goal to hit because it can take care of many emergencies that crop up.

But I can hear you say, I can’t afford $1,000. I can barely make ends meet now and you want me to pull more money out? How?! Here are three basic steps to create an e-fund, and you’ll be surprised that it’s not as hard as you think.

1. Pay yourself first.

No doubt you’ve heard this mantra before, but that’s because it works. As soon as you get paid and before you pay any bills, take $50 and put it into your e-fund. It can be a savings account, a money market account, or even a jar in your closet, though you may as well earn some interest on the money. If you can take $100, that would be better, but even if it’s only $25, that’s okay too. Work up to pulling out a little more each paycheck and stashing it away. You will be amazed how quickly this simple step adds up.

2. Lower your expenses.

Instead of that $3 cup of coffee every morning, make it at home. Saving that $15 a week alone could cover your e-fund contributions. Other simple changes can also save money such as buying reusable paper towels and plastic sandwich bags. Fill up a water bottle at home instead of buying a case of water at the store. Buy generic products instead of name brands. They’re the same quality as the top-shelf stuff, but you aren’t paying for the marketing.

Also, cut subscriptions and don’t pay for entertainment. Do things outdoors that don’t cost money. Make gifts instead of buying them. Most of these aren’t dramatic life changes, but incremental ones. And the savings from them, although small individually, add up.

3. Increase your income.

See if you can work overtime or get extra hours at your job. If needs be, get a part-time job or start a side hustle. Sell things online that you don’t use anymore. Some of these require a little more effort, but they can make a big difference in a hurry. And plow all that extra income into your e-fund.

Key takeaways

There are a lot of ways to get to that first $1,000 and no one says it will be easy. But it’s not that hard either. You need to be ready for what life throws at you and an emergency fund is an essential prep. If you can automate the process it will be even less difficult to achieve, but either way it needs to be done.

Just remember, though, this is a marathon, not a sprint. The key to making it across the finish line is taking that first step today!

 

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