How to rapidly build your emergency fund

Previously i’ve discussed the importance of having an emergency fund (https://zenmoneymindset.beehiiv.com/p/use-salary-month).

To begin with, this would be a starter fund of one month’s expenses. Longer term, aiming for 3 to 6 months is commonly held as a good target to aim for.

Now, getting that amount of money saved up may take some time, especially if you don’t have too much income left over at the end of the month to put away.

One estimate puts the average UK household living expenses at £2,700 (https://www.nimblefins.co.uk/average-uk-household-budget).

That would mean an emergency fund of between £8,100 - £16,200 would be needed. This could be a tall order and take a long time if there isn’t much money left over at the end of the month.

To get to £8,100 saved, at a rate of saving £300 per month, this would take you 27 months, just over 2 years! And £300 per month is likely a lot more than the average household can afford to spend.

With that said, it’s imperative to get this fund saved up as quickly as you possibly can to protect you from any curve-balls life may throw at you and ensure you don’t need to go into debt for any emergencies.

With that in mind, today let’s go over the steps with which you can find some extra money in your monthly budget and ramp up how much money you can put towards your emergency fund so that you get it fully funded ASAP.

1. Understand your income & expenses

Sounds simple enough, but it amazes me how many people don’t fully know or understand a) how much money they spend in an average month and b) where the money they spend goes.

Getting a handle on how you’re spending your money is the first step. Consolidate what you’re spending every month and split it into two categories; Essential and Non-Essential.

Mandatory spending would be your costs to survive aka housing, bills, transportation to get to work, groceries etc.

Non-Mandatory would be anything else aka socializing, treats, eating out, shopping for non essentials etc.

2. Aggressively scale back on your Non-Essential spending

With this understanding of your costs, it’s time to start making some tough choices and really cut back sharply on any Non-Essential spending.

You won’t want to do it. It will suck. You will not be able to live the type of life that you want to for a certain period of time.

I get all that, but it’s imperative to understand that having sufficient emergency savings should be seen as the top priority in your life, more so than your short term wants and needs.

View it as going through a slightly leaner / less than ideal season of your life, so that you can live the rest of it with the comfort of knowing that you’re covered and able to financially weather whatever storms life may throw your way.

Two Non-Essential spending areas where most people can commonly cut back on spending are';

• Luxuries - Everyone has their own little luxuries they treat themselves to. It could be buying a new tech gadget, going on a trip away, getting a manicure or hair dye, buying new clothes etc. Minimise / remove these from your spending temporarily in order to find some more margin in building your emergency savings

• Eating Out / Ordering Food - It’s very easy to slip into spending money on eating out far more than you should due to the general, whether due to poor planning or life just being busy and you wanting an easy option for food. Consider drastically reducing your eating out spending, it really adds up more than you’d realise. Even if you’re not able to completely cut it out, try to make it only 2-3 times per month at most

3. Earn more money!

It’s a fact of life that unfortunately, there is a limit to how many expenses you can cut in order to save money. However, there is no such limit to how much money you can earn. If you can bring home more every month, you can notably increase the speed at which you can save up for your emergency fund.

Raises, promotions and career progression come around quite infrequently, which leaves us with the option of either working more paid hours at your current job, or getting a second part time job / side hustle.

If you’re not wanting to commit to actually getting a second job / part time job at an employer, you could take advantage of apps such as Uber or Deliveroo to earn money during hours which suit you.

This will obviously not be the best paid work, but when in the situation of not having a fully funded emergency fund anything further you can contribute to your take home income is nothing to turn your nose up at.

The trade off here is that you may be working 50, 60 or even 70 hours per week if you take on additional work outside of your core job.

It will be tough, but remember it won’t be forever.

Getting to a fully funded emergency fund as quickly as possible, with the peace of mind it will bring to your life, is definitely worth the short term inconvenience it may cause.

See you next week,

Zain

If you’re feeling unsure about your financial future, or if you just don’t have as solid a grasp over financial concepts as you’d like, i’d love to help! I offer personalised 1:1 coaching sessions.

Please fill out the linked consultation form and i’ll be in touch https://eu.jotform.com/form/233086136375054