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Emergency Funds: Why, How Much, and How to Build One Quickly

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There was a time in the spring quite a few years ago during a particularly rough flu season when I had a ton of stuff to work on for my business.

I came down with Influenza B, which is not supposed to be as bad as Influenza A. Well, the people who say that were right.

Instead of feeling like a semi-truck hit me, I felt like I got hit by a bus instead. 🙄

Want to know how much I worked on it?

Zero. Nada. Zilch.

From Saturday until Thursday, I did nothing for my blog. Literally nothing.

Thursday I was able to muster up enough energy to answer a few emails. Friday was the same thing.

Then, that Saturday—eight days after I got the flu—I slept for ten and a half hours.

I never sleep for that long. I didn’t get up until 10 AM Saturday morning.

Even after it had been more than two weeks of having the flu, I had gotten almost nothing done that I wanted to. It was really hard to get back into the rhythm.

It. Sucked.

But that’s life, right? Unexpected things can, and will, happen in life.

And that’s why you always need a backup plan—like I didn’t have.

Unexpected Things Can Happen

I’m probably preaching to the choir on this one, but in life, unexpected things can happen.

In your personal finances, that can look like a car breaking down. You might be in theater and actually break a leg.

You might have complications from the flu and need to be hospitalized. An unexpected tax bill may pop up.

You might lose your otherwise secure job because of a global pandemic.

Whatever it may be, there is always a chance that something is not going to go as planned. It is important to have a backup plan. It is important to have a safety net.

That’s why you need an emergency fund.

Your emergency fund is your backup plan—your safety net.

Your Emergency fund is like the friend that’s always there for you. It catches you when you fall or make a mistake.

When things don’t go so well, it keeps you afloat.

Imagine for a moment you wake up tomorrow morning, get in your car, and there is a ton of noise coming from under the hood as you drive it.

Ok, no big deal. You take it in and see what is going on. Maybe there’s a screw loose.

The mechanic takes a look and delivers the news. Your transmission is in terrible shape and your car isn’t safe to drive.

It’ll cost $1800 to fix.

You quickly check your bank account balance and there’s only a couple hundred dollars total between your checking and savings account.

And that’s when the pit in your stomach starts to form.

If that were to happen to you, how would you feel?

Now, imagine that same situation, but instead, you hear the cost from the mechanic and immediately realize your $3,000 emergency fund will cover the entire cost. 

Now how would that make you feel?

The Why

Imagining that feeling of everything being taken care of when you have an unexpected expense is exactly why you need an emergency fund.

It should be a non-negotiable part of your personal finances.

An emergency fund will:

  • Keep your savings plan from derailing when life happens
  • Protect you when you have a truly unexpected expense
  • Keep your get-out-of-debt plan on track when something comes up
  • Help you sleep at night because everything is taken care of
  • Keep your stress level in check when things aren’t looking so well
  • Prevent you from needing to rely on credit cards for getting out of a financial jam

To put it bluntly, there is no downside to having an emergency fund.

So how much should you have?

The more I’ve studied and the more I write about personal finance, the more I realize that there is not a set amount that every person should have.

When you’re trying to determine how much you should have in your emergency fund, ask yourself these three questions:

  • How much extra money do you already have per month? If you’re living paycheck to paycheck, you may want to stash a little bit larger of an emergency fund because it may take you a little longer to replenish it. If you have somewhere north of a $1,000 extra each month, your emergency fund may not need to be as high.
  • What is the likelihood of you having a financial hardship? Consider how secure your job is, how young you are, how healthy you are, if you might be getting engaged and need to channel money to a wedding, etc. If you have kids, you may need a little bit more.
  • What’s the smallest emergency fund you’d feel comfortable having? This is what it all boils down to. How comfortable are you with the amount you have to take on a financial emergency? Do you feel comfortable having only $1,000 in the bank, having a year’s worth of expenses in the bank, or somewhere in between? Do what works best for YOU.

To give you a jumping off point, here are a few statistics.

Bankrate studied financial emergencies and found that only 39% would be covering a $1,000 financial emergency with cash in the bank.

That’s…not a high percentage.

They also found that the average cost of a financial emergency was $2,500 or more!

Would you be able to handle a $1,000 emergency? How about a $2,500 emergency?

How would it make you feel if you could handle an emergency of that magnitude with money in the bank?

Use the questions above to determine how much of an emergency fund you need.

Now it’s time to start building it fast!

13 Ways to Build Your Emergency Fund Fast

Now that you know the why and the how much of building an emergency fund, let’s get into building it quickly.

Here are some options for building your emergency fund fast.

1. Take a Savings Challenge

This one is for all of you who love the feeling of achieving something.

A savings challenge consists of either setting yourself a weekly goal for saving, or setting yourself a yearly goal and breaking it down into a weekly goal.

For example, divide an emergency fund goal $2,000 by 52 for the number of weeks in a year. This gives you a much more manageable weekly savings goal of $38.47.

Suddenly that $2,000 emergency fund doesn’t seem so big.

Divide whatever your emergency fund goal is by 52 to get your savings challenge rate. Then, set up a weekly automatic transfer of that amount to your savings account.

2. Get a double income for a little bit

If you’re a family that only has one person working, it might be worth discussing the other person going back to work for a bit.

This could be in the form of a part-time job or full-time job depending on how much money you’d like coming in.

A second income is a great way to build your emergency fund fast, especially if you don’t have any trouble with living off one income as it is.

3. Sell Your Old Stuff

If you’ve got old stuff laying around—or new stuff you don’t use—selling it on ebay or a local establishment could give you quite a payout.

I sold an old saxophone I had from Junior High School on ebay and received around $330 for it!

Look around your home and see if there is anything you can get rid of. Even things like old computers may sell for $50 to $100.

4. Use Your Tax Refund

According to the IRS, the average tax refund in the United States was $2,763 in 2017.

Depending on where you land figuring out how much emergency fund you should have, that could take care of your entire fund!

Related: If You Enjoy Getting a Tax Refund, Try this Instead

Or you could learn how to lower your refund and get that money on your paycheck throughout the year. That way you can build your emergency fund even faster or do whatever you want with the money.

5. Use Your Extra Paychecks

If you get paid every two weeks, there are two months out of the year where you get an extra paycheck. Use that money to bolster your emergency fund!

When you set up your budget, budget for only two paychecks a month regardless of if you’re getting paid three times that month. Then, that third paycheck is all extra money that you can put away.

6. Pick up a side hustle

If you’ve never heard of a side hustle before, a side hustle is simply something you do on the side to make some extra money. There are two main categories for side hustles:

  • Get a part-time job. If I were to get a part-time job, I would get one at Target because we shop there a lot for groceries. The employee discount would go a long way while also bringing in some money working there. You could also serve or bartend at a restaurant.
  • Monetize a hobby. Sell songs if you’re a musician. Sell artwork if you paint. If you’re handy, build things for people. Build websites for companies. Build computers for people. If you’re good at something, there is a good chance you can make money off it.

Again, this doesn’t have to be a permanent thing. You can just keep the second job or side hustle long enough to build your emergency fund.

7. Use Your Raises

Whenever you get a raise—whether from performance or from a promotion—“pretending” it’s not there is a great way to build your emergency fund.

Essentially, you continue to budget based on your old income. Then, you put the difference between your old income and new income directly into savings.

A great way to do this is automation. Automatically transfer the money to your savings account every time you get paid.

Related: Did you get a raise? Here’s What You Should do with it

8. Cut Out Some Other Budgets

In order to save quickly for your emergency fund, it might be a good idea to sacrifice some wants for a short while.

Things like eating out in general, cutting back on your fun budget, or cutting out your morning latte two times a week may go a long way in allowing you to save quickly.

You can also cut out cable as well.

Getting cheaper services such as Hulu Plus or Netflix can save you a huge amount each month. When we cut the cord, we saved about $70 every month.

9. Impulse Save

This is a trick you can use to save more.

Whenever you’re out and want to buy something impulsively, instead of making the purchase, immediately transfer the amount you were going to spend into your savings account.

Most banks have apps for your phone you can use to take care of this.

This is a great way to save more while minimizing the clutter you are potentially bringing into your home.

10. Workout at home

If you have a gym membership, try canceling it for a few months and put that money right into your emergency fund.

I’ve seen gym memberships run upwards of $75 a month so you could potentially see big savings from this.

To keep up your fitness goals, use a site like, which has a bunch of free, body weight based workout programs.

11. Set a goal

“Setting goals is the first step in turning the invisible into the visible.”

– Tony Robbins

Research continues to prove that goals that are written down are more likely to be achieved.

Write your emergency fund goal down. Give it an amount, and a calendar date you want to have it by.

Then, reverse engineer your goal to make it easier to reach.

And then look at your goal every morning. It’s a great reminder. It’ll keep you focused and motivated to keep going.

12. Temporarily reduce your 401K

For a short while, it’s definitely okay to reduce your 401K contributions—or stop them entirely—in order to give yourself an emergency fund boost.

The one thing I highly recommend is contributing enough to get your company’s full contribution match if they match your contributions.

Otherwise, a few months of cutting back on retirement savings won’t make much of a difference in the long run because you are using it to bolster your emergency fund.

Just don’t forget to continue saving after your emergency fund is built.

Related: My 401K Had an 80% Return! Here’s How I Did It.

13. Work Overtime

If you’re hourly, working a few extra hours a week can give you a nice boost at time-and-a-half.

Check with your company’s leadership to see if there is an opportunity for some overtime. Then, depending on how much extra money you want and how much time you want to commit, work as much overtime as you possibly can.

Don’t get to the point where you’re burnt out from working though. That could do more harm than good and actually cause you to spend more money.

Like everything, though, do this only for a short while to get your emergency fund up to snuff.


Emergency funds should be a must-have for every budget. They take a little bit of time to build, but with these tips, you’ll be able to build it in no time.

More importantly, having one can reduce your financial stress by knowing you’re taken care of.

Keep in mind though, your emergency fund may not be the same amount as someone else’s emergency fund. And that’s okay!

Take the time to figure out how much of an emergency fund makes sense for you and then build it from there.

Your budget will thank you. 🙂

Enjoy the article?

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I'm Tim Jordan

I’m an author and certified financial coach who cares most about the same thing you do—getting YOU where you want to be in your financial life.
I don’t settle for just teaching you money principles. I teach you how to take these principles, mold them to fit who you are, and build the life you want. It wasn’t until I stopped trying to fit into a financial mold that I was able to gain complete control over my money. Now, I want to teach you how to break that mold in your own life and and help you reach true financial freedom.
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I'm Tim Jordan

I’m an author and Certified Financial Coach who believes that everyone’s personal finances should be as unique as they are. Everything I create, write, and share is designed to help you find true financial freedom, whatever that may look like for you. 

My number one priority is to not only teach you money principles, but to teach you how to take these principles, mold them to fit who you are, and use them to build the life you want. 

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