Some of us know all too well to expect the unexpected because accidents will occur sooner or later. That’s why an emergency fund is key part of any financial plan. It’s hard to predict what curveballs life can throw your way and how much it’ll cost you financially, so setting aside some cash will help you deal with those emergencies.
It’s a great feeling when your emergency fund reaches a healthy and stable amount. You can ease off saving a little and stop worrying so much. But what happens when you have to use your emergency fund? I’ve heard numerous stories about life changing events that completely wipe out one’s’ emergency fund. All of a sudden, you’re back to square one. Rebuilding your emergency fund can be a long road but it’s something that must be done. Here are 4 tips to get you started:
Stop Spending ASAP
Before you take a step back to decide on your next steps, stop all discretionary spending immediately. Without the luxury of having an emergency fund to fall back on, it’s important to start getting back into that frugal mindset again. After all, you need to start saving to get your emergency fund back in good health. Put your income towards necessities only and put the rest towards savings.
Reevaluate Your Budget
Reevaluate your budget next. If you’re lucky, you only had to spend a small chunk of your emergency fund and you still have the bulk of it left. Or maybe you had to spend it all in one go. Determine how much you need to save, then look at your budget. Find areas you can reallocate and categories you can cut back on.
Explore New Income Streams
Rebuilding an emergency fund can take a lot of time. But unfortunately, time isn’t a luxury we have. Your goal is to replenish the funds as fast as possible and that can be hard to do on your regular income. So consider new streams of income to save more quickly since any additional income can make a significant impact on your emergency fund. This can be anything from selling items in your home to picking up a second job.
Learn from Your Mistakes the Last Go Around
If you’ve built up an emergency fund and had to dip into it, one of things you have on your side is experience. You already know what it takes to start an emergency fund and add to it. Look back on what you did and learn from your mistakes. There’s bound to be things you wished you did differently or better to save up even more.
Keep your goals in mind as you embark on rebuilding your emergency fund. Understand how much you need to save and how you’re going to do it. Most of all, aim to make it even better than your last fund.