Everyone always talks about the importance of an Emergency Fund. You know the saying,”have 3-6 months of you living expenses in an Emergency Fund.” That can be a huge task for some of us. The first question I have for you is–Do you have consumer debt (credit or car loan)? If you do, then you should not focus on a 3-6 month Emergency Fund. I follow Dave Ramsey’s ideas on getting out of debt in his book The Total Money Makeover. In it he has seven steps to financial freedom. The first step is to get an Emergency Fund of $1000. This doesn’t seem like much of an Emergency Fund, but it is only there to “catch” all of the little emergencies you might run into along the path of becoming debt free. We have finished step one ($1000 Emergency Fund) and we are now working on paying off our consumer debt. The $1000 Emergency Fund is important to us so that we have a little something to fall back on if an unexpected expense comes up–that way we do not have to use our credit cards and increase our debt load.
With the importance of the $1000 Emergency Fund, I am going to give you 5 tips on how to get there, so that you can start working on paying off your debt.
1.) Stop Using Your Credit Cards!
The first and most important step is to stop using your credit cards. If you keep using your credit cards, then you will be digging yourself into a deeper whole. We accomplished this by tightening our budget, which Dave Ramsey talks about in The Total Money Makeover, which I recommend you pick up a copy–it is well worth it.
2.) Pay Minimum Payments on all Debts While Saving Your Emergency Fund
In the first step of your road to “Financial Freedom”, your Emergency Fund(EF) should be your number one priority. If you have any extra money, don’t put it to your consumer debt just yet–put it all towards your EF. Once you have your EF in place, then you can focus on your debt; so for now, just pay the minimums on all of your debts.
3.) Sell all that You Can!
A quick way to get money for your EF (this is what we have done, and are still doing to pay off debt), is to sell anything you don’t want, need, or use on eBay, Craigslist, or at garage sales. Think about what is more important–having stuff, or being financially free. We realized that a lot of our “stuff” was the reason we were carrying so much debt (we bought it on credit)–so why not get rid of it and get some cash.
4.) Work on the side to Make More Money
Search Craigslist for cash gigs or look in your local newspaper for extra work. My wife and I picked up a paper route to make extra money. You could also get a part time job to help expedite the process. Just think of this extra work as a means to an end, it is only temporary until you reach your goals. Think of how much guilt free time you will have once you are debt free! Check out my article for other ways to make extra money.
5.) Spend Less
My final tip, which I think is vital to getting out of debt, is to stop spending so much money. You don’t need to get a coffee every morning, or go out to dinner every weekend. We even cancelled our cable to save money every month. Get creative–a lot of the things we spend money on are not necessities. Worry about getting the “newest” thing once you are able to pay cash for it.
I hope this list helps you raise your $1000 Emergency Fund fast!! For extra help, please pick up Dave Ramsey’s The Total Money Makeover. It has his 7 steps to financial freedom and contains all the forms you will need along the way.
If you like what you read, buy me a coffee.
