An unexpected car repair, yearly tax payment, or a surprise medical expense are all situations when I’ve been able to rely on my emergency fund. Growing my cash savings, slow and steadily, has also lowered my stress levels when it comes to money.
But how can you build an emergency fund when you’re barely making ends meet? Maybe you don’t have a great paying job, and the pandemic cut your hours or pay. Maybe you’re saddled with debt from school or from a personal loan. Maybe, like we had at one point… you have a lot of credit card debt and saving for emergencies doesn’t seem feasible.
But I am here to tell you: it is possible to save even when you’re not making a lot of money. Here are a few strategies to help grow your emergency fund when you don’t have that much cash coming in each month.
12 Ways to Build an Emergency Fund on a Low Salary
Identify how much you’ll need. It’s easy when people say ” have 3-6 months worth of savings in case of an emergency”, but that’s not easy if you don’t make a lot of money. When starting out, create a goal that is attainable. In the beginning, my goal was to save enough for one months worth of rent, utilities and groceries.
Track your spending habits. Are you really saving every penny possible? Are you eating all of your meals at home? Has it been months since you’ve gone out, seen a movie or gone shopping? Has it been a few years since you purchased a new phone or new car?
If your answers to those questions were ‘no’, then you should take inventory of the things that you spend money on daily. When I decided to build my emergency fund, I realized that the $5 I spent each morning for bagels and juice added up to over $100 a month… that’s close to $1,200 a year for breakfast alone! My first step in cutting down my spending was identifying what small expenses I could cut and then, I put that money into an emergency fund.
Let people know. When your friends and family know you’re trying to cut back on expenses, it’s likely you’ll have support and in some cases, allies who will join you in building their savings too. It also gets less awkward when you don’t want to catch a movie with friends, don’t want to go to brunch with your parents, or pass on a fancy dinner with your bestie. When everyone is on the same page it’s much easier to reach your savings goal.
Automate your savings. I have a savings account that is set up to deduct money from each paycheck. By automating your savings each month, you’ll consistently grow your savings without feeling the hit. I started by scheduling $25 to come out of each paycheck. By years end, I had over $600 of cash set aside, which may not seem like a lot, but it’s a nice amount of money to have when you don’t see it come out of your paycheck
Cut tech. We live in a very tech-filled world. Think about the devices or equipment you might pay for on a monthly basis. Do you pay a lease for your smart phone? Do you ‘need’ to have that new iPad when a new model comes out? How much do you put down each year for a smart watch or an Amazon Alexa? All of these items are really nice to have, but not ‘need to haves’ in my opinion. Making small sacrifices and cutting out the charges you pay for electronics can help you save a lot of money.
Eat at home. Eating most of our meals at home helped Kurt and I saved thousands of dollars when we first lived together. Paying off debt from our wedding, loans from our apartment renovation, and costs associated with grad school meant we had to find ways to cut spending while building an emergency fund.
Earn extra income. Working part time can be a great way to save for your emergency fund. If your full-time job takes up most of your time, consider evening gigs, weekend work, or freelance work you can do remotely.
Work overtime. Overtime work can be a great way to build your emergency fund. I’ve had plenty of jobs where the salary wasn’t great, but the opportunities for over time work helped so much. Signing up for extra hours at work helped me pay off debt while allowing me to building my emergency fund.
Save your tax refund. There have been years when I’ve gotten a tax refund back totaling $150, $200, and even $500! Instead of treating myself to a new outfit or a weekend getaway, I put that money right into my emergency account.
Clip coupons. I’ve clipped coupons for years and have saved hundreds of dollars on food and products. If clipping paper coupons isn’t your thing, load digital coupons onto your phone. I have a CVS loyalty card where I receive cash back and discounts almost every time I shop. On good days, I can combine $5.00 off + 30% off my order. I make a habit to put funds I’ve saved into my emergency fund.
Cut subscriptions. This might be really hard to do, but to see true progress it helps to cut those small spending habits that occur each month. Subscriptions like Netflix, gym memberships, meal subscriptions, and more add up over time. Opting for free entertainment, free workouts and making the time to shop and meal prep can help you save hundreds of dollars each year- money that can help your emergency fund grow.
Only use the account for emergencies. Once you see your savings grow, it might be tempting to dip into your emergency fund for a mani/pedi, a new pair of sneakers, clothes, etc. But don’t! An emergency fund is just that- a fund you use for only emergencies.