How to Build an Emergency Fund on a Tight Budget

Posted July 12, 2021 by in Lifestyle

Having an emergency fund is truly an essential part of overall financial health. For some people it may seem impractical or even impossible to have a significant amount of cash at their disposal but deemed not usable. The truth is though, that nobody thinks an emergency fund is necessary until they are faced with an emergency and must deal with the financial stressors that come along with many unexpected events, on top of the event itself. The traditional suggestion is three to six months’ worth of living expenses set aside, below are a few ways to start chipping away at yours even if you feel like you do not make enough to save enough. 

Vary Up Your Savings

An emergency fund does not necessarily have to be in the form of cash in your bank, many people use investments or alternate type of savings approaches to keep money out of sight and out of mind but still somewhere where it is working in their favor. A life insurance policy is a good example of this. Adding the monthly fee to your budget should not be that hard, and then you will have money available to use via selling to receive a cash out, or to give to beneficiaries once you are gone if you never needed to access it yourself. 

There is some strategy involved here and Dawn Life Settlements can show you how you can get more out of your life insurance policy by getting more cash with a life settlement. Be sure that you are clear on all the rules and criteria that you would need to meet to qualify for a cash out before you sign up since your initial thought is to be able to access the cash in case of emergency. Another essential part of a good emergency fund and plan is knowing the ins and outs before emergency strikes as dealing with the details amidst tough times can quickly overwhelm you. 

Take On a Side Hustle

An obvious choice, work more to earn more, but side hustles have benefits that your main, or traditional job may not. Flexibility and control over your schedule are a big one. With a traditional job, you likely have a boss to be answerable to, but with many side hustles, you are your own boss. If getting a second job does not seem like your cup of tea think about hobbies that have the potential for profit that you might already be participating in. Perhaps you are an animal lover, you could offer dog walking or even short-term dog sitting services as a side hustle and bank the cash towards your emergency fund while doing something you already know you love. 

Set Small Goals and Live Lean

If you are already on a tight budget, it might seem daunting or even upsetting to think about having to cut out yet another thing from your budget to be able to start saving for an emergency fund. Instead of looking at these changes as permanent set small goals and live lean for a period that feels manageable to you, and bank that cash away. A good example here would be committing to thirty days of not eating out. One month really is not that long, and the potential for savings is significant depending on how often you were indulging in that treat. 

*Photo by Joslyn Pickens