Interested in contributing to your emergency fund? Here is a true story about how I boosted my emergency fund in three months.
In a previous post, I mentioned that I was starting over my emergency fund and that I had less than $1,000 saved. In that post, I talked about my fears, especially the fact that if I lost my job, the $950 in my emergency fund would not be enough to cover my expenses. The onslaught of COVID-19, scared the daylights out of me.
The truth is that I (collectively we) were not ready for COVID-19. However, the shock of what was happening was more than enough to make me get up and take action. As a result, I decided that I should focus on increasing my emergency fund. To be honest, working from home allowed me to cut back on some of my expenses and it was a lot easier to find extra money.
This situation was a learning experience, that reinforced the importance of being prepared. It was a time where if I was put to the test, I would have failed miserably. But I’m grateful that I was able to use the experience to make better financial decisions.
How I Boosted My Emergency Fund
The first thing I did was to calculate how much money I needed to cover one month’s expenses. My expenses came in under $2,000, but I decided to round up to an even $2,000 for simplicity. It would not hurt to have extra in the account.
1. Set a Savings Goal: I know that in the first instance I needed to have $2,000 in my emergency fund account. This would cover my major monthly and annual expenses and other small expenses that popped up from time to time. Seeing that I already had $950, I needed to top-up the account by $1,050.
2. Create a Realistic Timeline: I needed to give myself some wiggle room so that I could comfortably save the money, but not be stressed about it. After thinking it through, I gave myself three months to save $1,050. This meant that I needed to save $350 each month. This was something that I could achieve and still maintain life as it was at the time.
3. Create a Plan: I knew where I was and where I wanted to go, so I just had to connect them with a plan. To fund the account, I needed money. My salary is fixed, so it meant that I had to rearrange my budget to free up funds. As a result, I decided to put some of my savings on hold, and instead reallocate this money into the emergency fund.
Now that I have $2,000 in my emergency fund, I am going to focus on getting a second month’s expenses saved. I will go a lot more slowly but, it will be a steady pace. My current goal is to have the two months saved by the end of the year. I will not take the events of 2020 for granted. I know that things could have gone a lot differently.