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How to Create an Emergency Fund

By: Michael Millington

Having an emergency fund can help you avoid being surprised by unscheduled needs in life. Whether it involves an unexpected trip to the hospital, your car breaking down or a necessary renovation in the kitchen, having the funds available in a pinch is always desirable. Most people look to their credit cards to provide a safety net in these instances. While it is a plausible method of being ready for an emergency, having the money available for the same purpose can help avoid the inevitable debt that would follow. Here’s how you can create your own emergency fund.


Budget in Emergency Savings

When you make your monthly budget there should be certain categories that are always present. You should always account for your living expenses and you utilities so you don’t end up in financial hardship. Another facet of your budget should be your savings. This will allow you to have a nest egg growing for future endeavors as well as protect from a potential loss of income. Depending on how much you can save, it might be beneficial to create a separate emergency fund for unexpected hardships.

Most people will turn their main savings account into their emergency fund based out of necessity. While this is not a bad practice, it also forces you to choose between making large purchases now and waiting for disasters later. Though disasters might take precedence in the eyes of many, you might still want to purchase a new television for the living room or go on that cruise you’ve been eyeing. In this case, it might be a better practice to have two separate savings accounts, one for large purchases and the other for financial emergencies.

The main thing to remember is that you must be able to comfortably afford to fund two savings accounts. If you cannot then you should not push yourself to do so. Putting all of your available money away can lead to an imbalance in your day-to-day finances. If you cannot accommodate two savings accounts, then maintaining focus on one emergency fund would be imperative. Having a savings account of some sort is the most important thing to focus on.


Account for Immediate Necessities

The difference in your ability to save will rest in whether you have any pressing financial matters in the near future. Having to take care of certain issues as they arise isn’t the same as handling a full-blown emergency. However, it does play a factor in how you end up spending (or saving) your income. In order to be prepared for the future, making sure you have your finances in order plays a significant role. Make sure your budget includes anything you can think of to avoid surprises.

Take into consideration any large projects that need immediate attention. For instance, if you need a full body car repair (or if you need to replace your car altogether), or if you need to fix a certain section of your house. Place these endeavors into your budget and calculate whether you can save comfortably after deducting the new undertakings. Be honest with what needs to be done now and what can wait. If you hold off on certain projects or repairs they might end up costing you more in the long run.

One way you can begin a healthy saving behavior while still tackling the immediate necessities is by utilizing lump sums of money to pay for projects. If you have a lump sum of money coming in to you, such as a tax return or a bonus from your job, then allocate that towards your projects so you can begin or continue to add to your savings. This is an effective way to separate your savings from everything else you need to pay for.


Save with Discipline

A key factor of saving is consistency. While some believe it’s harder to start some things, it can also be just as hard to maintain what you start. Being able to incorporate and keep up with your monthly savings is a true sign of discipline on your part. Utilizing services like automatic transfers can help take the stress out of tracking your savings manually. Just be sure to have enough money to pay for your other expenses.

Once you begin saving, set goals for yourself to accomplish. Having money marks as goals will show you how far you’ve come since you’ve started saving. Each time you pass a goal, immediately make a new one. While doing this for an emergency fund, you’ll gradually be able to handle larger emergencies as time passes. With the ability to pay for emergencies, you might have the ability to alleviate a looming stress that may have kept you from saving to begin with.

If you happen to spend your savings on an emergency, don’t let your saving habits change at all. It might be disheartening to see all of your hard work disappear at once, but don’t lose sight of what it existed for. Once your emergency fund serves its purpose, continue to build it back up. If anything, the ability to use your emergency fund would be a testament to your discipline and commitment to save.


Having funds available to you during an emergency can help get you through some harrowing instances in life. However, many people might not have the ability to save money due to overwhelming amounts of debt. Large amounts of unsecured debts can keep anyone from creating an emergency fund. That’s where Guardian Debt Relief can help. Contact us to see if we can reduce your principle debt amount and help you save some money. Call us for a free consultation and let us help get you out of debt. Take the first step and contact Guardian Debt Relief today.

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