By Kiesha Easley
Saving money for an emergency fund is not a foreign concept to most people. I knew that it was something I needed get my personal finances in order, but the part I struggled with was actually saving the money.
After all, every time I got paid, after paying all of the bills, I barely had anything left to buy food and gas, let alone, save for some far off (or not so far) emergency. I was barely making ends meet, there wasn’t anything left to save.
When emergencies hit, they always threw us into a mad scramble – and it seemed like they always hit us when we were already down. All it took was one thing to go wrong and next thing we knew, everything was out of whack. Disconnection notices would pile up. Every day we had to pray that when we flipped the light switch, it would still work. Can you relate to this?
At first, I always blamed a lack of money for all of my troubles. I believed that was the number one reason why I could never really save anything. I’ve realized now that it wasn’t always a lack of money that kept me from saving, but a lack of wisdom. I had no vision about how I’d go about saving and I had no plan for my money that would even make saving possible.
I read two books that really jarred my preconceptions about saving. I read Joe Sangl’s I Was Broke, But Now I’m Not, and Dave Ramsey’s Total Money Makeover – these two books showed me that I was doing things out of order. What I needed to do was create a budget, first.
Before I could attempt to save anything, without a budget, or a plan for my money, there was no way I’d be able to save a dime.
Before I started budgeting, a typical pay period proceeded like this:
I’d get paid. I’d go buy fuel, go shopping for groceries, toiletries and would grab a few pieces of clothing, if needed. Then, a few days later, I’d pay my bills and would end up depressed after realizing that I either didn’t have enough to cover everything or I’d have absolutely nothing left.
Those unfortunate times when I realized I didn’t have enough left me feeling stressed and completely frustrated. To make ends meet, I’d either have to borrow some money or try to make some payment arrangement that bought me more time, but would throw off the next month’s budget.
Those two books showed me what I was doing wrong:
Before purchasing one thing, I should’ve been looking at the money I had available, the dates certain bills were due and how much I needed to fulfill basic needs such as food and fuel. Knowing how much I’d have on hand at any given time of the month meant I could plan which bills would get paid and when.
Instead of waiting for the due date to figure out how I’d pay it, I should’ve been planning ahead and lining up my due dates with my pay dates. That would’ve allowed me to spread things out instead of trying to pay them all with one check because I waited until the last minute.
When I started planning and setting money aside for basic needs, it forced me to put a cap on those items based on how much money I’d have left after bills. Before this, I’d just look how much money I had and that meant if I had $500 left, I’d just keep spending until it was gone, instead of putting more towards the next round of bills or an emergency fund. But now I’ve set limits.
How to Start Your Own Emergency Fund
A plan or budget (it’s not a dirty word), must be created for 30-90 days before one cent is spent.
Once the budget is in place, you will see how much you have left to save for the emergency fund. The money that would usually get used for splurging will now get funneled into a savings account.
If you notice that you’re operating at a deficit, before you can begin saving, you’ll need to take measures to reduce the outflow of your money. You may need to renegotiate the terms of some of your debts, or cut out unnecessary expenses such as cable, reduce your cell phone plan, or even take drastic measures such as returning that rented furniture to the store or downgrade your car for one with a lower payment.
It may challenge your comfort zone, but it must be done in order to free up the money you really need to be saving.
I decided to follow Dave Ramsey’s “Baby Steps” that he explains in the book, but my biggest struggle was getting my husband on board. He wasn’t exactly excited about the budget and our finances were fragmented. I got paid and took care of certain bills and he did the same. I was noticing that while I often had nothing left, he was able to shop and buy items he enjoyed. If I was going to get our budget to really work for our whole family, we’d have to combine everything, bills and income alike. It wasn’t easy, but by the end of the first month, we had everything merged together.
After I got my budget together, I committed to saving $1000 – for my emergency fund, but you could aim for $500 if your finances won’t allow more, but try to save at least $500 and as soon as you can add more, do so.
Ramsey’s instructions were to “Go crazy and get this money in the first month of your plan.” The goal is to create this fund as quickly as possible to serve as a buffer for emergencies. This may seem extreme, but it’s so necessary. If you can’t get it together in the first month, shoot for 90 days – you’ll be surprised how much you can save when you are really determined. You’ll come to realize that there are many things we purchase without thinking that we could easily live without.
Here’s a recap of the steps build an emergency fund:
1. Create a budget for the next three months. I use the monthly budgeting tool from IWasBrokeNowImNot.com. (This is how I was able to see how much I had available and where it was going.)
2. Save $1000 (or $500) for an emergency fund and commit to only using it for REAL emergencies.
Challenge yourself to really get this emergency fund in place and next time an emergency comes around, instead of being thrown into crisis, you’ll be able to handle it sweatlessly.