Here’s How To Build a 6-Month Emergency Fund

Nicole Spector   Wed, July 27, 2022

We may be a country sorely lacking in financial literacy, but we all have one core principle ingrained in us: We must have an emergency savings fund.

In theory, it sounds pretty simple: You make a certain amount of income, and set a certain amount of that aside in an account that you only tap into when the going gets especially tough and you need to shell out dough for something like a new car part or a surprise medical bill. But embarking on building a six-month (the recommended amount) emergency fund can be challenging.

Where do you begin? With the help of finance experts, we've laid out a multi-step plan of attack.

Go In With the Right Mindset

"Saving is primarily a mental game that you can win," said Adam Garcia, founder of The Stock Dork. "Setting away even a tiny amount of money on a regular basis can eventually lead you to your objective, no matter how low your starting point is. Time and a little self-control are all that is required."

Get an Accountability Partner

"The journey to starting and faithfully contributing to an emergency fund is more successful when done with a partner," said Lucia Jensen, CEO of WeLoans. "Consider working with your financial advisor to help you stay on track."

Map Out Your Spending

"Take the time to distinguish what your necessary expenses are, and what your discretionary expenses are (i.e. streaming services, shopping for clothes)," said Katie Ross, EVP of American Consumer Credit Counseling (ACCC). "If you're in a tight spot financially, you may want to cut out some discretionary spending. Your emergency fund should cover your essential needs. After you calculate your total expenses for one month, multiply that number by six. The final number is how much money you should have for your six-month emergency fund."

Rethink Subscriptions and Sign Up for Promotions

"Whether it's your cable company, cell phone provider, or gym membership, it's time to rethink the value of your subscriptions to their services," said Owen Wilcox, co-founder of USInstallmentLoans. "You have probably forgotten about other subscriptions, yet they continue charging monthly fees. Consider canceling, putting some on hold, or renegotiating the deals to free up critical funds to be redirected to your emergency fund."

Start Setting 5%-10% of Your Paycheck Aside

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