8 Tricks That Will Help You Build an Emergency Fund Even if You Are Broke

save money even if broke

An emergency fund is a critical component of your overall financial health. Stashing away cash that can either cushion you in case of unexpected and dire expenses or enough money to cover your expenses for at least six months can give you time to think and restrategize when disaster strikes.

Now, the problem is building that stash when you are already living on a shoestring budget and chronically broke. 

Don’t worry. We have a couple of tricks you can use to steadily work towards setting up the ideal emergency fund.

1. Break the Task into Small Achievable Goals

Saving enough money to last you a whole six months is not an easy task. Most people give up once they realize just how much they need to save to get there.

A better way out would be to start with a short target. 

First things first. Find out how much you spend on basic bills, food, and other mandatory expenses in a month. 

Assume the expenses can be evenly shared across the four weeks in a month and divide that by four to get how much you theoretically spend per week.

With the weekly amount in mind, you can start working on:

  • Saving enough to last a week
  • Saving enough to last two weeks
  • Saving enough to last four weeks
  • Enough to last 8 weeks…

See the trend in the series? I am working on doubling the previous number. You could work in increments of a week at ago.

Either way, I broke the entire task into small and achievable chunks that make it easier to commit to.

2. Set Small and Easily Achievable Regular Contributions

The easiest way to save money is to decide on a deductible amount and work with that. For instance, it would be easier to go through the month knowing you will be deducted $100 from your emergency fund at the end of the month compared to just sailing through hoping to put away what you can.

Come up with a comfortable amount you can commit to saving per week, per month, or per paycheck. It could be a percentage or a fixed figure.

As long as it isn’t too high to be a struggle, you will soon build the comfortable habit and realize you can even save more without straining. 

Improve on the deduction as you find better budgeting tricks to free even more money for the emergency kitty.

3. Automate your Savings

Once you settle into the rhythm of steady monthly or weekly savings, you can create a standing order and let the bank take charge of moving the money from your primary account to your emergency kitty.

Set up an automatic transfer from your checking account to a separate savings account dedicated solely to your emergency fund. 

This way, you won’t have to rely on willpower alone to save consistently.

4. Reduce expenses

Look for opportunities to reduce your monthly expenses. Cut back on non-essential items like dining out, entertainment, or subscriptions. 

Negotiate better deals on bills like cable, internet, or insurance. Every dollar you save can be redirected toward your emergency fund.

Reducing expenses will reduce the total amount you have to save for your emergency kitty. Additionally, it will leave you with more disposable income in the short term meaning you can save up the emergency money even faster.

5. Save windfalls

Whenever you receive unexpected money, such as tax refunds, bonuses, or cash gifts, resist the temptation to splurge. Instead, put the extra funds directly into your emergency fund.

In my books, windfalls could also be the savings you make when you find a sale on groceries and other essentials when out shopping. 

Save your windfall money

Don’t blow the money you save on such offers. A good way to think of it is you are putting away the money you could have spent buying that item to use it again in the future.

6. Cut back on discretionary spending

Take a close look at your discretionary spending and identify areas where you can make further cuts. 

For example, consider reducing your entertainment expenses, eating out less frequently, finding cheaper alternatives for transportation, or exploring free or low-cost hobbies and activities.

7. Cut down on debt

I know this might sound counter-intuitive but paying back your high-interest loans is a good way to build your emergency fund – especially if you term load repayments as mandatory monthly expenses.

Repaying the high-interest loan will save you money in the long term since you will have less interests to repay. However, don’t double down and spend all your money clearing the debt. Do it in moderation. 

High-interest debt can be a significant obstacle to saving. Focus on paying down debts like credit cards or personal loans as quickly as possible. Once you free up those payments, you can redirect them toward your emergency fund.

8. Stay motivated and disciplined

Building an emergency fund takes time and effort. Stay focused on your goal, remind yourself of the importance of financial security, and celebrate small milestones along the way.