How To Start Saving For Your Emergency FundOct 29, 2022
How many times have you decided to start saving and then you got overwhelmed by not knowing what to save for or how much?
That’s what used to happen to me and then I’d end up at the end of the month not having saved anything because I didn’t have a good enough reason to not spend the money I had put aside, and the temptation was too high.
My goal today is to give you clear directions on how to set up what I call a ‘freedom fund’. The purpose of this type of savings is to give you a stronger sense of financial security.
1. Open An Account
Having a dedicated account for this is crucial, if you just wait and hope that you won’t spend it all before the end of the month you’ll be playing a losing game.
It’s a good idea to find a name that you like as well as I think this creates a healthy emotional attachment to it and puts a barrier in place against spending it. You can use my name ‘freedom fund’ or you could call it something simple like ‘crisis fund’ or ‘emergency fund’. Get creative here and you can always change it in the future!
2. Calculate Your Expenses
With any savings account, having a goal is crucial as it helps motivate you to keep the momentum up. It’s much easier not to dip into your savings when you have a specific number in mind to get to.
The way I like to determine my goal is by calculating all my expenses for the month and then I times that by three. You can do six months if you prefer but I find three makes me feel safe enough and gives me space to save for other things too.
If you want help with calculating your monthly expenses you can use my Personal Survival Budget Template
3. Pick An Amount
The amount is less important than actually just starting to put money aside. Experts generally recommend 10% of your income to savings each month. However, I think it’s important to not feel bad if this isn’t currently achievable, this can be a goal to work towards!
You could start with even 3%!
Even if it seems low, starting where you're at is always the best option, don’t wait for things to be perfect to begin saving!
4. Make It Easy!
The general rule is, the harder a habit is, the lower the chances of it sticking are. You can set up an autopayment very easily in most bank accounts. I have mine set up to go directly there at the beginning of each month when I get paid, that way I don’t even see the money in my account.
5. Cut The Guilt And Bring In The Celebration
Celebration propels you forward while guilt will hold you back. Guilt is often the biggest thing stopping people from building habits. The feeling that we didn’t do something perfectly can sometimes stop us from trying to get back on track.
One thing I know about myself is that if I set my goal too high, I give up and spend more than I wanted, and on top of that, I don’t even enjoy spending because of the overwhelming guilt.
So how do we avoid this cycle? It’s pretty easy, we budget for the things we like to spend money on! So instead of only accounting for the essentials and feeling guilty each time you buy a coffee out, factor those coffees into your monthly budget and enjoy them knowing that it didn’t impact your savings goal!
Whatever it is you like to spend money on, create space to do that because you know you’re going to do it anyway right?
Finally, don’t forget to celebrate your achievements along the way, the reward system is hardwired in our brains and we should take advantage of it!
Set small milestones and acknowledge when you hit them! One of my favourite things is to have an accountability buddy who I’ve told about my goal so that when I hit it I can tell them!
The Wrap Up
Okay, I’ve done my bit, now it’s up to you to take the first step. Go and do it right now! Oh, you don’t have time? Okay, open your calendar and schedule a time to do it later in the day or week.
You’ve read this whole blog about saving so you clearly want to do it, the only thing left is to make the commitment to it!
Remember, the goal isn’t to be perfect, if you miss a payment or dip into the fund it doesn’t mean you failed. You only fail if you give up when you mess up, so commit to keep on trying and I promise eventually it will be easier and you’ll have yourself a freedom fund!
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