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How to Rebuild Your Emergency Fund

Ah, snap. Things were going so nicely. You felt like you had your life together. And then . . . it happens. It meaning your water heater busts, your car manages to get two flat tires, and you crack a tooth . . . why?

Thankfully, you had an emergency fund. Unthankfully, now you don’t. It feels good to pay cash to fix the problem, but then your emergency fund is drained—and now what?

Now, you go all Rocky Balboa on it and run up a bunch of stairs chanting, “It ain’t about how hard you hit. It’s about how hard you can get hit and keep moving forward.” Meaning, you rebuild that emergency fund.

There’s no shame in that game. This is what the fund is for—emergencies. It did its job—and well—so get back on those stairs and show life you’re going to keep moving forward. You will rebuild your emergency fund.

How to Rebuild Your Starter Emergency Fund

The starter emergency fund is $1,000. We call this the first Baby Step in our money goal journey of 7 Baby Steps. If you’re rebuilding this emergency fund, you can do some or all of these five tips.

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A couple may seem a little intense, but remember, this is for a short time to get that $1,000 back in action for the next financial bump in the road of life.

1. Make a budget.

If you aren’t already on a budget, you need to be. It’s the best tool to realize where your money is going so you can start planning where you want it to go. And right now, you want a good deal of it to be going into savings, right? Get on a budget so you can make that happen.

Might we suggest EveryDollar? We might. And we shall.

With EveryDollar, you can budget on your desktop or on the go with our mobile app. You can even use the “Fund” feature to watch your emergency fund rebuilding progress in action.

2. Track your spending.

To make a budget work, you need to track your income and expenses—everything that comes in and goes out. This way, you’ll know if you still have money in your restaurant budget line to join your friends in celebration of National Burrito Day and, of course, if you’ve got enough to spring for guac or queso.

Might we suggest the premium version of EveryDollar? It makes tracking super simple. This upgraded version connects to your bank and streams those transactions right to your EveryDollar budget. All you do is drag and drop them to the right budget line. Boom.

3. Pause other money goals (Baby Steps).

So, you’re busy punching debt in the face. You know we love that. Paying off debt with intensity is our jam. We call it Baby Step 2.

But if you’ve got to go back to Baby Step 1 to fill up your emergency fund once again, pause the debt-punching intensity. Pay the minimum payments on all debt only until your savings is back at $1,000. Then, let the fists of financial fury loose on your debt once again.

4. Go on a short-term spending freeze.

You can make this one as challenging—aka as long—as you’re willing. Try a day of zero spending or a week (maybe even a month) of no superfluous—aka unnecessary—spending.

Be your own barista, wear those old wedges, make a marvelous movie night at home. Gather up all the money you save by not spending on these extras and take it to the bank. Literally.

5. Cut out some extra expenses.  

There are some spots in your budget that are a little . . . fluffy. One of your three TV streaming services (the one you haven’t logged into in months). Your superhero sock of the month subscription box. The maid service. Restaurants. (Don’t hate! We aren’t saying to never eat out again! It’s short-term, friends.)

Gut the fluff. For now. You might even realize you don’t miss some of it.

How to Rebuild Your Fully Funded Emergency Fund

If you’ve had a much bigger expense hit and you need to rebuild what we call Baby Step 3 (a fully funded emergency fund), you can use any of the tips above and some below as well.

Since a fully funded emergency fund is a storehouse of savings for 3–6 months of expenses that can keep you afloat in case of a big emergency, like job loss, you’ll be working on this longer and may want to take bigger measures.

1. Sell stuff.

You’re probably surrounded by things you don’t really use: an extra television, a surplus sofa, unused electronics. Get selling. Go online to places like Craigslist, Poshmark, ThredUp or your local selling page on Facebook.

Or dust off those folding tables and make some signs for a good old-fashioned yard sale. If you’ll sell off some of that excess, you can clear out the clutter in your life and earn extra cash to stash back into your emergency fund.

2. Find a side hustle.

If you need more money, make more money. Get yourself a side hustle, aka an extra part-time job. Delivering pizzas used to be about the best, quickest, easiest way to do this. Now, it’s one of many simple options.

You can also pick up delivery jobs for Amazon Flex, Uber Eats, Grubhub, Postmates, Shipt, or a grocery store near you that offers food delivery services. Uber and Lyft are good if you love driving and love people. Oh, the conversations you’ll have and, oh, the interesting people you’ll shuttle around.

And don’t forget about all the ways you can profit from your talents. Tutor, give music lessons, babysit, pet sit, dog walk, or design birthday invitations. People are paying for these services—they might as well pay you! You can rebuild your emergency fund quickly, and maybe you’ll discover you want to keep the side hustle to point that extra income toward other money goals.

3. Save on groceries by meal planning.

You can cut a quick $100–300 off your monthly grocery budget line with one simple tip: meal plan. Yes, it takes some work. After all, it’s called meal “planning” and not meal “showing up on your table without effort.” But that extra hundred or three a month is no joke.

Just like your budget gives all your money a job, meal planning gives all your food a job. When you make a meal plan, you’re buying only what you need for the week. It keeps you accountable to yourself when you’re walking by all those beautiful endcaps in the grocery store with promises of delicious snack times and lunches your kids will tell all their friends about on the playground.

Make a meal plan by mapping out what your family will eat all week for breakfast, lunch, dinner and snacks. Save even more by planning these things around what’s on sale that week at your favorite grocery store. Make a list. Check it twice. Then, shop that list—and don’t veer off of it.

Grocery shopping isn’t a Sunday drive with no place to be. Don’t take a side road. Stick to the list. Your wallet will thank you—at least a hundred times.

4. Cut the cable.

The average household spends $1,237.20 a year on cable TV.(1) You’re probably not going to go radical, drop the cable, and not pick up any other television options. But you could trade in cable for a much lower-priced streaming service—like Hulu, Netflix, Amazon Prime Video, YouTube TV, Sling TV, and the list goes on.

Even if you pick up two of those options, you’ll save around $90 a month and still have tons of television entertainment available to you and yours.

5. Consider downsizing your home or apartment.

Whoa. Did we go too far with this one? Hang with us a moment. We aren’t saying you should move your family of six to a one-bedroom apartment. But give this idea of downsizing (or down-pricing by moving to a different neighborhood) some thought.

When we talk about budget percentages, our suggestion for the housing category (rent or mortgage, HOA fees, insurance, and PMI) is no more than 25% of your take-home pay. If you’re spending more than that or if you’re right at this amount but would love to free up lots of money in your budget, a move could be the way to do it.

It might mean giving up some amenities (do you even use that puppy spa?) or that second bonus room (the one that collects all the stuff you’re planning on selling in the next garage sale anyway), but it could also mean quickly rebuilding your emergency fund and gaining a huge peace of mind with your finances.

6. Switch to term life insurance.

If you have a whole life insurance policy, it’s time to switch to term life. Why? Many, many, many reasons.

We’ll cut to the chase, though. First of all, you pay on a whole life insurance policy for, well, your whole life. That means that, after you’ve invested and saved well to retire well, you’re still paying on an insurance policy you don’t even need anymore because your gorgeously plump savings and investments are your insurance now! No, thank you, whole life.

Secondly, term life is a better financial deal. Whole life costs about $300 more a month. That’s a quick $300 to put into rebuilding your emergency fund. And when the emergency fund is back in action, that’s an extra $300 to throw at saving up for retirement, paying off your mortgage early, or setting up a college savings plan for junior.

That $300 a month turns into $3,600 a year and $108,000 over 30 years. Gasp. Go switch to term life insurance right now.

7. Know it’s okay to say no.

Oh, the power of the word no. We should all exert this power more often.

Should I have a third helping of that chocolate molten lava cake with a side scoop of vanilla ice cream? No. Should I get a perm and tease my bangs? Surely that ‘80s hairstyle will make a comeback. No. Should I buy these tickets to the polka rock music festival? It’s not really in my budget, but . . . No.

Enjoy that first helping of cake, leave that ‘80s hair where it belongs (in the past), and don’t spend money outside of your budget.

Listen, we know that the budget feels a little tighter than usual when you’re trying to rebuild your emergency fund, so you’ll be saying the magic word no more often than usual. But that’s okay. It’s for a season. And what you’re really rebuilding here is security against what could come and empowerment over your money.

That’s worth any season of being scrappy or sometimes stingy with your money.

You can do it.

Log in to EveryDollar today. (And if you don't have EveryDollar yet, then get started!) You’ll see where you can trim your budget, and you can set up a fund to watch all that rebuilding progress in action.


Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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