How to Build your Emergency Fund - When you Have No Money

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Closed red cash tin marked Crisis Fund

This year’s pandemic highlights the importance of having enough money set aside in an emergency fund to cover six to nine months of key expenses should you lose your job. But how do you build an emergency fund if you don’t have any extra money? The easiest way to accomplish this is by reducing your expenses. Here are some creative ways to increase your cash flow by cutting your spending.

How Much You Need

First, determine how much of an emergency fund you need. Identify the essential monthly bills and multiply by the number of months of funds you'll need. At minimum include the following:

  • Food
  • Housing costs, including rent or mortgage payments
  • Medical insurance
  • Transportation
  • Phone service and other utilities

Ideas to Fund your Emergency Account

Temporarily Suspend Nonessential Monthly Expenses

Ditch your $150 cable bill for a $20 streaming service. Cook your meals from scratch instead of purchasing pre-packaged food. Eliminate or re-think your entertainment spending. Until you get your emergency fund fully funded, consider less expensive alternatives for items you normally purchase.

Radical Cutbacks for a Set Period of Time

Can your family live with one car instead of two? Instead of downsizing from cable to a streaming service, what about getting rid of television subscription fees altogether? Consider if there are areas you’d be willing to make a radical (and temporary) change to free up some cash.

Track Your Spending

When you go on a diet, nutritionists often recommend counting calories. When going on a spending diet, consider tracking your purchases. You will quickly see items that are not essential. Spending at coffee shops, paying for multiple streaming services and paying for extra cell phone services are just a few examples. You may discover problem areas you didn’t know about once you start writing down your spending in a notebook or on a spreadsheet.

Stick to a Shopping List

If taxes have been deferred from your paycheck through the end of 2020, be prepared to have your paycheck withholdings increase substantially beginning in 2021. If possible, open a savings account to set aside the taxes that were not withheld from your paychecks. When it comes time to pay your taxes, you will have funds to weather the repayment storm.

You may need to get creative with your approach, but finding the money to build your emergency fund is essential, now more than ever.


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Disclaimer

The information in this article is written as accurately as possible and to best of the writer's knowledge. However, there may be omissions, errors, or mistakes. Because of this and changes in circumstances, the information in this article is subject to change. This article is for informational purposes only and should not serve as professional, financial, medical, emotional, and/or legal advice. Readers may rely on the information on this article at their own risk, but they should consult a CPA, financial expert, or other professional for advice. Givilancz & Martinez, PLLC reserves the right to change and handle this article series, and therefore, may remove or alter any part of this article or the comments section. Any comments inserted by readers are not the responsibility of G&M PLLC and do not represent the thoughts or ideas of G&M PLLC.