How to Save for your Emergency Fund

Everyone knows someone who has been laid off, or lost a spouse, or you might find yourself in a medical situation where you are unable to earn income as planned.  These are the times that you need to dip into your emergency fund to help make ends meet.   Stats show that nearly half  of Americans have no, or little, emergency funding planned.

So what if you don’t have an emergency fund?  Well, you need one.   Studies say that you need at least 6 months available to pay for food, gas, utilities & medical expenses.  My preference is to go with more as life is unpredictable.

To calculate what you will need for a 6 month emergency fund, add up all your bills of alternative months and multiply by 6.  I say alternative months as costs like heating, and water can vary significantly through the year depending on the season. This way, you get a good sample of your yearly spending.

Start by cutting back on ad hoc expenses that you really don’t need, like that extra cup of coffee, or nail salons … or restaurants and the movies etc.  And as we embrace winter, clothing gets easier as you can bundle layers, so not everything needs to be “this season’s” prime fashion.   We all want to look our best, but not at the downfall of your emergency fund, believe me!   So don’t splurge on every new sassy outfit that you want!

After you have cut back on month #1, step back and see how much you saved – and then study your finances to really determine where you can cut even more in month #2.   Really look at how you are spending your finances and know where you are spending.  This will help you understand what categories you can cut the most!  If you have high credit card bills, be sure to pay them off and try spending only what you really need just for one month.  I call it the money diet!

During month 2, start to research how you can cut back on some of your important bills, like car or house insurance, mortgage payments, and healthcare.  Are there other plans that work better for you? has a great comparison on bank rates. is also another great site to help you choose the right health insurance at affordable rates.  Call your TV and cable companies to ask for better rates on the TV, phone and internet plans that you have.  If you have been a loyal customer, chances are you will find a better rate without having to disrupt your service.

And whatever happens, keep it up!

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