Step One - Your Emergency Fund

Step One: Your Emergency Fund

Before you spend another dime, the next step is to make sure you have an emergency fund.

Emergency funds seem kind of stupid until you need them, but oh, when you need them, they sure save your butt.

What is an emergency fund?

It's a pile of money you keep around for if when shit happens.

Examples of shit includes:
  •  Your fridge dies and all the food in it spoils.
  •  You wake up in a lot of pain one morning. Cue the medical bills and missed work.
  •  Your job evaporates without warning, or cuts your hours to practically nothing.
  •  A family member passes away unexpectedly and you have to travel across the country for their funeral - and miss work to do it.
  •  Your car suddenly needs a new whoosit whutsitmajigger. You also need a rental so you don't lose your job.
  •  Your live-in BF/GF dumps you or turns abusive and you need somewhere to go, pronto.
  • The ATM ate your paycheck and your bank is taking its sweet time investigating. (It happened to me!)
These are all things that have happened to people that I know in the past year. Some of them had e-funds, some of them did not.

Imagine going through any one of these situations with $2.17 in your bank account.

Now imagine going through it with $2000, carefully saved over many months, or years, immediately available, on hand.

This isn't money that appeared out of nowhere. Your emergency fund is made up of dinners you could have eaten out but didn't, outfits you could have bought but didn't, heck, even the 89 cent candy bar you could have bought but didn't. If you have any extra money that isn't spent on keeping you fed, clothed or breathing, you should prioritize the emergency fund.

What ISN'T an emergency fund?
  • For spending on anything else. No, a vacation isn't an emergency, though I get where you're coming from.
  • An investment. We're not looking for a return on this money, so don't tie it up where you can't reach it. This money doesn't belong in the stock market, because you might need stitches on the same day as a stock market crash. Savings and checking accounts get crappy returns, but the goal is to keep this money on hand. The return is keeping you out of the payday loan store.

I'm dirt poor. Can I skip this?

If you do nothing else, do this. Being poor doesn't stop emergencies from happening- in fact, it makes it worse when they do.

Imagine what you'd do if you didn't have an e-fund and one of the above situations happened to you. You'd be stuck doing one of these:
  • Heading to the payday loan shop for a 400% interest rate loan.
  • Putting the debt on a credit card. A $1000 auto repair just turned into $1200... or $1500. (Where did these numbers come from?) Your inability to plan ahead just cost you hundreds.
  • Begging your family/friends for help, which makes you feel like guilty and ashamed and can damage your relationships and mental health.

Make it a priority. Having to pay extra interest on money spent covering an emergency is one of the reasons it is hard to get out of poverty. If you're doing any spending at all above subsistence, put something towards your e-fund. Start with a nickel, a dime, a quarter. Add $5 when you can. Keep adding until you get to 3-6 months of expenses. You will thank yourself in your darkest hour.

How do I start an emergency fund?

The bank doesn't offer accounts labelled "Emergency Fund"- it's up to you to know what it's for. A regular old savings account works great. Personally, I keep my e-fund in the bottom of my checking account, but I know I can trust myself not to spend it. My checking account charges me a monthly fee if I ever go under a certain balance, which just happens to be the amount of my e-fund. This "buffer"

Where you keep your e-fund is up to you, as long as you're sure you can grab it when you need it (i.e, NOT the stock market). I don't recommend keeping it in paper cash, however: one of the situations where an e-fund comes in handy is if your house burns down, and if your fund was under your mattress then you're shit out of luck.

How much should I put it away and where should I put it?

Most people agree that 3-6 months of basic expenses in a savings account is all you need. 

 If you want to get advanced, consider your life situation. If you have potential emergency causers in your life (I'm talking about kids, homeownership, and pets), you want to be prepared for that. Here's some more to ponder when figuring the size of your emergency fund.

Emergency funds are really a simple concept. You don't need a lot of math to figure out your goal number. Total up food, rent, utilities, and transportation to work. Multiply by some number between 3 and 6, depending on how much you like livin' on the edge.

3-6 months of expenses? That's several thousand dollars for me, where am I gonna get that?

I don't expect you to have it all at once. Even if you've only got five bucks in your wallet right now, earmark that for emergencies. Open a savings account if you don't already have one. Even dumping your spare change in a jar is better than nothing. Add as much as you can, every paycheck. Make it grow until you have your target number.

Once you've got your emergency fund settled, you're ready to move onto Step Two: Take the Free Money.

Have more wisdom on E-Funds? Want to share a great resource? Have a question? Write to me in the comments below, or catch me on twitter or insta @moneywithmeow! I sleep better with an #emergencyfund!

Share this article with your friends, because we're all better off when we're better informed.


  1. Now this is interesting, we should always have some emergency fund as you never know when you gonna need it. Thank you for sharing this blog with us

  2. An emergency fund ! sounds a good term for savings money for meeting future emergencies. Everybody should have a habit to make emergency fund savings.

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