How to Start and Build Your Emergency Fund Now

Death and taxes aren’t the only two certainties in life. You’ll also have to face extraordinary expenses once in a while, such as hefty home repairs, a new car, or a medical expense. When those major expenses arrive, it’s best to have an emergency fund on hand.

If you don’t have an emergency fund, then now is the time to start building one. Here are a few steps to help you do just that.

Start Small

As with so many other things in life, it’s best to start small. The longest journey begins with one step.

Instead of telling yourself that you need $5,000 in the bank, aim far lower. Start by saving just $250 or $500. Then, build your cash reserves up from there.

If you aim for a lower goal, you’re more likely to reach it. On the other hand, if you try to bite off more than you can chew by stashing away a huge chunk of cash you can’t afford to take out of your budget, you might get frustrated and quit. As a result, you may have to search for emergency loans or go into considerable debt to pay for an unexpectedly large expense.

Lower Your Credit Card Interest Rate

One of the easiest ways to save cash on a monthly basis is to get your credit card interest rate lowered.  This way you can put the money that would have gone to your credit card interest payments straight into your emergency fund instead. If you’ve got a multi-thousand dollar balance on one or more cards and you’re getting socked with double-digit interest rates, then you’re spending a significant amount of your hard-earned money in interest every month.

Call your credit card company’s customer service department and ask to have your rate lowered. If you’ve got great credit (i.e., you’ve been paying your bills on time), then the company might work with you. If the company is unwilling to lower the rate, keep an eye out for offers in the mail about balance transfers. Just be sure to read the fine print on those offers to make sure that a low interest rate on a balance transfer doesn’t turn into a high interest rate six months or a year later.  This is a great option to save money without having to cut back on any of your other regular expenses.

Use Your Tax Refund

Tax season is upon us. If you’re expecting a big, fat refund from Uncle Sam, then guess what? You can reinvest your tax refund into your emergency fund. That’s a great way to get your emergency fund started.

Sure, that means you won’t be able to use your tax refund to get a 60-inch television set for your family room. However, that’s the kind of sacrifice you’re going to need to make if you want a healthy emergency fund.

It’s great that you want to start an emergency fund. Although it seems like a daunting task to many cash-strapped households, with a little bit of financial discipline, you can be well on your way to saving for whatever unusual and expensive surprises life throws your way.