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10 Easy Tips To Build An Emergency Fund

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Having an emergency fund is pretty crucial to make sure you’re covered when disaster strikes.

Emergency funds are designed to cover sudden expenses like medical bills and auto repairs. Financial sources recommend having the funds to cover at least 3-6 months of your monthly expenses.

Saving up such a large amount of money may seem impossible. It certainly takes effort and time to build a comfortable emergency fund. Fortunately, it doesn’t have to be as difficult as you might imagine.

In this post, we’ve covered 10 easy tips to build an emergency fund. Learn exactly how much you can save by reading real-life scenarios, find links to helpful resources, and more.

Read on to discover simple solutions to start your fund.

1. Eliminate Expenses Wherever You Can

This might sound like an obvious tip, but small expenses add up fast. It’s easy to forget that you spend $5 or $10 extra here and there. You may shell out hundreds of dollars per year without even realizing it.

Start by writing a list of everything you spend money on – not just your major bills. Coffee runs, cosmetics, and entertainment services are a few good examples.

Here are two scenarios to see how much you’ll save by eliminating or reducing expenses:

  • You pay $16 for Netflix Premium and $12 for ad-free Hulu every month. Switch to the $9 Basic Netflix plan and the $6 Hulu plan with advertisements. You’ll save a total of $156 per year for your emergency fund.
  • One study shows millennials spend $2,008 per year on coffee. That’s about $5.50 per day. Cut out coffee runs three days per week and brew your favorite roast at home instead. This small change will save you $858 per year for your emergency fund.

If you made these two changes, you’d have $1,014 to add to your emergency fund. Write your list and go over it carefully.

There’s a good chance you’ll find a handful of ways to reduce or eliminate expenses.

2. Save Spare Change (Manually And Digitally)

Spare change is a surprisingly easy way to build up your emergency fund. One study shows that Americans throw away $62 million in coins each year. You don’t have to dig through couch cushions to start saving your change. Below are some tips for manually and digitally saving loose coins.

  • Keep a change jar next to where you store your wallet or purse. Make a habit of putting your spare coins in the jar as soon as you walk through the door.
  • Don’t pay fees to count or convert your change. Companies like Coinstar will automatically count your change to convert into cash. Unfortunately, they charge an 11.9% fee for the service. The good news is that you have other options. Some banks offer free coin counting machines to members. But you can always take a few minutes to roll your coins and deposit them. This may take a bit more time, but it’s 100% free.
  • See if your bank offers a way to save your change automatically. Your bank may allow you to round up purchases to the nearest dollar. For example, you buy an item that’s $3.12 with your debit card and the purchase is rounded up to $4.00. Your bank automatically invests the $0.88 into a savings account. These small amounts add up fast.
  • Use apps like Acorns and Digit to invest spare change. These are often called robo-investor or micro-investing apps. You link your debit and credit cards to the apps. Your purchases are rounded up to the nearest dollar, and your change is put in an investment account. You’re guided through the investment process automatically, so the whole process is easy and financially savvy.

3. Set Up Automated Deposits

If your budget is tight, you may think this isn’t an option for you. That’s totally understandable, but even the smallest automated deposits count. Deposit a portion of your paycheck into a savings account, even if it’s just $5, $10, or $20 per.

If you’re paid bi-weekly, you’d save around $130 to $520 per year.

You can also adjust how much money you automatically deposit.

For example, a small pay increase may allow you to deposit $15 per check instead of $10. If money becomes tight, you may need to deposit $10 per check instead of $20.

Look into your online banking options or contact your bank to learn how to do this.

4. Supplement Your Income With Flexible Side Gigs

Your work, school, or family schedule may not allow you to get a traditional part-time job. It can be difficult to stick to a set schedule or work a set number of hours. This doesn’t mean you can’t supplement your income to build an emergency fund.

Side gigs are flexible ways to make money in your spare time. With many gigs, you don’t have to commit to any sort of schedule. Other ones allow you to create your own schedule to suit your needs.

We often review these money making opportunities. Check out these Frugal For Less posts for some great examples:

5. Find A Budget-Friendly Phone Plan

The average smartphone phone plan is over $90 per month for a single person. That adds up to $1,080 per year and may not include add-ons, fees, and other costs.

Fortunately, there are many affordable smartphone plans for single users and families. Below you’ll find some budget-friendly plans and details about how much money you could save. Savings examples are based on the $90 average smartphone plan cost:  

  • The T-Mobile One unlimited plan gives you unlimited talk, text, and data for $70 per month. If you switch to this phone plan, you can save $240 per year.
  • The Sprint Unlimited Basic plan gives you unlimited talk, text, and data for $60 per month. If you switch to this phone plan, you can save $360 per year.
  • The Straight Talk Ultimate Unlimited plan gives you unlimited talk, text, and data for $55 per month. If you switch to this phone plan, you can save $420 per year.

These frugal phone plans easily help you build up your emergency fund. You can save even more money if you don’t need an unlimited phone plan, too.

6. Sell Unwanted/Unused Items

Selling items you no longer need is a fast and easy way to get money.

There’s a good chance you’ve got a few items that’ll get you some cash. Gift cards, clothing, old electronics, and books are just a few examples.

You don’t need to put time and effort into having a rummage sale. Try the following resources to quickly sell unwanted items:

  • Sell new and used gift cards online. Websites like Raise and Cardpool make it easy to sell all types of gift cards. If you’ve got some you don’t plan to use, turn them into cash.
  • Sell used clothing, shoes, and accessories online. We recommend ThredUP and Poshmark for doing this. These two websites/apps are very popular platforms with great reputations. They make it easy to sell and ship items, so you don’t have to do much work.
  • Sell used cell phones and other electronics online. A lot of people have old electronics collecting dust at home. You can easily sell them online through platforms like Gazelle. They’ll appraise the value of your used electronics and let you know how much they’re worth.
  • Sell locally using buy/sell/trade apps and sites. To sell items in your city/area, use Facebook Marketplace, Craigslist, Letgo, and OfferUp. You list your items and receive messages from potential buyers in your area. Once you agree on a price, meet up to sell and get paid in cash. List the same items on multiple apps and sites to get the best results.

7. Lower Your Heating And Cooling Costs

The average household spends a minimum of $2,200 per year on energy costs. Of course, this amount varies depending on where you live, the size of your home, and lots of other factors. But overall, energy bills are a major expense for most people.

The good news is that there are many ways to reduce your energy bill. You can add the money you save per month to your emergency fund. Even if you save just $25 per month, you’ll add $300 to your fund within one year. Here are some ways to reduce your energy costs:

  • Lower your thermostat to save 15% on your energy bill. If you lower your thermostat by 10 to 15 degrees over an eight-hour period, you can reduce your bill by 5 to 15 percent.
  • Regularly clean vents, change filters, and other basic HVAC maintenance. Dirt buildup on your air vents can reduce the efficiency of your heating and cooling system. The same is true when it comes to HVAC filters; they should be changed regularly.
  • Seal air leaks near windows and doors. Inspect your windows and doors carefully to see if there are any air leaks. You can easily repair them using inexpensive caulk. This helps keep your home cool in the summer and warm in the winter.

8. Earn Cash Back On Essential Purchases

At Frugal For Less, we frequently talk about earning cash back. If you have to spend money on essentials, why not get paid for it? There are so many cash back apps and websites to choose from. You can easily earn cash back on every purchase you make. Just use a mixture of the apps and sites below.

Most of these apps and websites give you real cash for your purchases. When you can redeem your earnings, transfer them to the bank account you use for your emergency fund.

The amounts may not seem like much, but that’s why it’s important to use a variety of cash back portals. Your earnings can add up pretty quickly.

Some of the sites and apps also offer gift cards as payment. Gift cards can be a useful way to save money on future purchases. And you can contribute however much you save toward your emergency fund.

For example, you earned a $20 Amazon gift card through an app. When you use it to make a purchase, you can put the $20 cash you’ve saved in your emergency fund.

9. Lower Your Insurance Rates

It’s no secret that insurance is a huge expense, and it’s not one that you can avoid. The average person spends $4,200 each year on insurance – that amount includes health, auto, life, dental, and homeowner’s insurance.

You may have started out with the most affordable policies available. But if it’s been a few years, you may find that there are even lower insurance rates now. Consider these tips when looking for lower rates:

  • Shop around for multiple price quotes. You can easily get free quotes online, and it usually takes just a few minutes. Try to find 3-5 quotes to see if there are affordable policies that suit you.
  • Bundle your insurance policies. If you’re happy with one insurance provider, see if they offer a discount for bundling policies. For example, you may really like your affordable car insurance policy. See if you can bundle home, dental, and life insurance policies with the same company for a lower rate.
  • Always check if you’re eligible for discounts. Most insurance companies offer discounts for all types of things. Some examples include discounts for good drivers, military veterans, active duty members, college students, and senior citizens. You may be able to find a small discount or two, and the savings can add up fast.

Even a small decrease in insurance costs can do wonders for your emergency fund. If you cut the yearly average of $4,200 down by just 5%, you can save $210 per year.

10. Save Your Tax Refund

Your tax refund is a great opportunity to start or build a healthy emergency fund. The average tax refund was $2,727 in 2018. That amount could possibly cover a month or more of your expenses. Plan ahead for next year and use a tax refund estimator.

It only takes about one minute to fill out the tax refund estimator form using your current income and financial info. This free tool can help you find out approximately how much you’ll add to your emergency fund. You don’t have to provide any personal information to use it.

More Ways To Build Your Savings

With the tips in this article, you can build a healthy emergency savings fund. It’s a good financial practice to have a separate savings account, too. Frugal For Less often discusses ways to save money, build savings, and more. Check out these posts for more helpful tips and info:

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