When I think back to the days of living paycheck to paycheck it gives me immediate anxiety. It’s funny to reflect and realize that I operated this way for years and never thought too much about it. Now, being on the other side (and having a child to care for) the idea of not having a safety net has me glancing at my bottle of lavender (and the bottle of red wine). As graduations are in the midst of happening all over and a new generation branches into adulthood, I thought it would be a good time to share my journey and some tips for starting your own emergency fund.

An emergency fund is a concept that I read about in Dave Ramsey’s Financial Peace and it is basically what it sounds like: a fund set aside for unexpected life events. After reading his book and deciding to take control of my finances, I began this first step. The goal was $1000. I was in my mid-twenties and not generating much of an income, so this was going to be a process but I was committed. I started religiously taking 10% out of my pay checks. To keep it from getting mixed into my checking account, I would withdraw the cash and tuck it into an envelope in my nightstand. Probably not the safest place in hindsight, but nevertheless it was my plan.

It took me a few months to reach my goal. I religiously put in the 10% of all income and threw any additional at it that I could. What I thought was going to be a daunting task surprised me as actually being fun. I loved putting those few dollars in my envelope every week and watching the progress. It was an empowering feeling as the concept of “paying myself” started to make sense.

Fate is a funny thing. About a week after saving the $1000, I had to have unexpected car work done and the total was my entire saved amount minus about $2. As frustrated as I was to see my hard saved money gone, it was a proud moment to have the cash to pay for it. What would’ve happened if I didn’t have the emergency fund? The same thing that always happened when I needed a large sum unexpectedly, I would’ve swiped my emergency card… aka the credit card. You know the handy dandy card that they push on you as soon as you turn 18. I literally remember the companies standing in front of the main student building on my college campus giving away coupons for a free pizza if you signed up for a card. Ahhh the American dream.

The ultimate goal of this fund is to keep you from ever putting an emergency on a credit card where it will cost you at least 20% more than paying cash (if you don’t immediately pay it off). Whether you’re a newbie to managing your finances, or are looking to switch gears and get out of debt, this is a great first step. Here are some tips I can offer:

  • Start by taking 10% out of each paycheck.
  • To reach your goal faster, cut back on shopping, restaurants, and impulse buys.
  • Clean our your closet or garage and have a yard sale. There are also Facebook groups devoted to posting things for sale in your area.
  • Pay yourself first. Make your goal a priority and let other things be secondary.
  • Don’t get sidetracked. This is for unexpected expenses only…not a pizza craving.
  • Have someone hold you accountable. Designate a supportive friend or family member to keep you motivated.
  • Calculate the interest and annual fees spent on your credit card in 2017. Nothing will drive you more than tallying that wasted income.
  • Keep your saved money in a separate account, or go old school with a piggy bank or a cute motivational pouch.
  • Start a budget and make your emergency fund one of your expenses for the month. Read more about how important a budget is here.

Please note that this post does contain affiliate links. You can read more here. I am not paid to mention Dave Ramsey. I follow his system and would highly recommend it to anyone.

Top Photo by H. Armstrong Roberts