4 Tips To Rebuilding Your Emergency Fund

by Connie Mei · 5 comments

fire extinguisherSome 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.

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  • Jordan says:

    Most importantly start saving today! If you had to dissolve your emergency fund once then you know how easily it could happen again. Make sure you get right on it, and start building that thing back up. It worked for you the first time, allow it to protect you for future emergencies as well, so that you don’t end up in a hole.

  • Chella says:

    for a long time now I have been trying to build an emergency fund and It has not picked up yet to the level I would want it to be at this moment. I think the biggest mistake I have been making is that I have been making is that I have not been re-evaluating my budget before i determine how much to save to the emergency fund. but i have just realized how important it is towards building an emergency fund.

  • Alan says:

    Reevaluating a budget is perhaps of the most essential steps. It is crucial limiting immediate spendings in order to rebuid an effective and strong emergency fund, definitely.

  • Ramona says:

    Our own emergency fund took a hit in the past 2 years, but we’re slowly re-building it. As our business is also recovering, it’s easier to get back to a better place, financially.

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