Building an emergency or rainy-day fund counts as one most important parts of your financial life. When you have an emergency fund, you’re less inclined to worry about what an emergency room trip or a car repair will cost you. You’ll be prepared for such an eventuality. If you have a large enough emergency fund, then you won’t even worry much about big financial stresses, like a job loss. 

Most people know that they need to create an emergency fund. However, many don’t know how to build one. In fact, one of the most common questions that a company like August Funding gets is, “How do I build my emergency fund, especially if I don’t have any extra money?” 

While the answer to this question isn’t always easy, it is simple, meaning that you may have to sacrifice a bit in order to create your emergency fund. However, if you implement the following five suggestions, you’ll be on your way to building an emergency fund that even the wettest rainy day will have a hard time washing away.

The Two Types of Emergency Funds

When reps at August Funding refer to an emergency fund, they actually can be speaking about two separate funds, a short-term fund and a long-term fund.

The short-term fund is a small amount of money – relatively speaking – that allows you to fix your broken furnace or car. That’s usually the fund that has one- to two-thousand dollars in it. This you want to keep in an account you have easy access to, like a savings account.

The long-term fund provides a cushion for a major financial disruption, like illness or job loss. In this fund, you keep three- to six-months’ worth of income stashed away. You might put this in a money market account or some other account that is a little harder (but not impossible) to liquidate on short notice. While you’re waiting for the funds to come through, you do have the option of using your short-term emergency fund. 

Any time either of these funds gets depleted, make sure that you fill them up again. 

1. Save Your Tax Return

Earmarking your next tax return for your emergency fund counts as one of the simplest steps you can take to get your rainy-day fund started. What makes this so ideal is that it can be quite a large sum of money that you’ll get all at once. It can be enough to build the foundation for a small emergency fund of $1,000 – $2,000 dollars without much effort, depending on your tax status, of course. 

2. Get a Side Gig

Financial expert Dave Ramsey suggests that those without an emergency fund look for a side hustle. This can be anything that brings in some extra cash, from dog walking to pizza delivery that will bring you a couple hundred extra dollars a month. 

3. Re-Examine Your Budget

The circumstances of your life may not yet allow for a second job. However, that doesn’t mean you’re powerless over your financial circumstances. Nerd Wallet points out that cutting expenses is also a viable option for those who want to put together an emergency fund. 

If you go this route, plan on taking a look at where you can cut costs out of your budget. Are you eating in restaurants too often? Avoiding coupon-cutting because it’s a hassle? Using your credit card without a second thought? 

Once you know where your money is going, you’ll be in a better position to start cutting away the financial fat. Any extra cash that comes from these efforts should be put into a special savings account reserved for this purpose. 

4. Have a Yard Sale

Most of us have items that take up room in our closets that we haven’t seen, used, or worn in years. Why not clear out the clutter and make some cash in the process? Go through your closets, your kids’ bedrooms, the garage, etc. and look for items that would be worth some cash to you and valuable to someone else. Sell those items and put the cash you make into your rainy-day stash.

5. Start a Change Jar

It’s amazing how your small change can add up. Just think of all of the times that your coffee bill was something like $4.71 instead of $5.00 or your grocery bill cost you $39.28 instead of $40.00. The extra change that you get from these transactions can go into your change jar if you have one. 

If you don’t, then you can look into a mobile app that allows you to save your change each time you pay something with your debit card.

Last Thoughts on Building Your Emergency Fund

Having a rainy-day fund can mean the difference between comfort and disaster when fate comes calling. However, saving for a rainy day requires consistency and discipline: The amount of money you save is almost secondary. It’s the habit of saving that makes the most difference. 

If you get into the habit of saving even when you have very little money, then it will be an ingrained habit when you finally have more money. Best of all, you’ll have the funds you need to see yourself through life’s storms because of your efforts.