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How to Build an Emergency Fund When You Don't Have Extra Funds

Preparing for a Financial Storm
Image by chefranden

The emergency fund.

Here's a description of the emergency fund according to Dave Ramsey:
It is a rainy-day fund, an umbrella. An emergency fund is for those unexpected events that are not regularly planned for happening in life - you lose your job, there's an unexpected pregnancy, the car's transmission goes out, or, or, or. This is NOT an investment or Bahamas fund! Before attacking Baby Step 2 (the Debt Snowball), save $1,000 as a baby emergency fund. A fully funded emergency fund is 3-6 months of your personal expenses set aside in a savings or money market account; build this up in Baby Step 3.
Do you have one? Is it big enough to weather a financial storm that sticks around for a while? Are you wondering how to build an emergency fund when you don't have any extra funds?

Our family has certainly been there. Actually, we're still there. We do have an emergency fund, but it's only a three month supply, and given the current economic situation, we really would like for it to be at least six months, if not more.

If your family is like our family, you're already eating rice and beans and beans and rice. You feel the importance of having mom be at home with the children, so you're willing to sacrifice and live on one income. You've pared down your pared down budget. You're still struggling to make ends meet.

We really don't have extra to set aside each month. Well, we have a little extra, but it's a very little. So, we've been trying to be resourceful as we've sought to build this fund and continue on our baby steps.

Here are some of the ideas we've found useful:

1. Reevalute Your Budget
I know I said that we've already pared down and pared down more. But sometimes you can find some more little things that can be cut. For us, the extras are usually found in small pockets of disposable income. Something I'm really trying to work on is always paying with cash. It has helped tremendously in this department.

2. Sell Something
Are there items in your home you don't really need that could garner a fair price on Ebay or Craigslist? Try to think outside of the box. Sometimes things we think of as junk (especially old/vintage items) can sell well!

3. Use Your Tax Return
Some of you may still be expecting a tax return. Instead of spending it, can you put it towards your emergency fund?

4. Dream Up Ways to Increase Your Income
Develop an entrepreneurial mindset. You don't have to be bound to traditional part-time jobs for extra income. Do some brain storming.

5. Ultimately, Trust God
You know what? God wants us to be wise stewards of His money. And He makes it pretty clear in Proverbs that a wise man saves for the future (Proverbs 21:20) But He also wants us to look to Him to supply our needs. I've been trying to remember that while I should be wise and set money aside for emergencies, I shouldn't trust in that money or anything else besides my Father.

Sometimes I feel frustrated that we aren't making the progress I would like to see. But the truth is that we're doing our best to please God with our finances. We are seeking to be generous givers, working hard to live simply, and asking Him to provide ways to make a little more income so that we can pursue things like investing for the future and paying off our house.

He sees the sparrow! How much more does He watch over His children?

For more money saving ideas, please visit Frugal Friday at LifeasMOM!


Leslie said...

We are totally there right now-- thanks so much for sharing these thoughts!!

Buffie said...

Great tips. We've been trying to balance building our emergency fund with paying off debt. Some months are better then others, but at least we are making progress.

Your Frugal Friend, Niki said...

This was a wonderful post!


Christi said...

Wonderful post. Thanks so much for sharing these thoughtful tips!

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