Years ago, I switched careers and moved to a new city.
Financially, I felt safe, because I had a small emergency fund.
If times got tough, that was my safety net.
Times did get tough.
In one instant, I lost everything.
If you’ve depleted your emergency fund, here’s how to go about rebuilding it.
When I switched from full-time to freelance, I did a crappy job of preparing.
I didn’t learn much about how my finances would change,like taxes.
With one giant check to the IRS, my entire emergency fund was gone.
For a long time, I felt vulnerable, desperate, and unsure of what to do.
But in a year or so, I rebuilt my emergency fund and became financially secure again.
Take these to steps re-establish yourself after you’ve lost your safety net.
You’re in emergency mode, and you should adjust your monthly spending accordingly.
This is like regular budgeting, only you want to cut any spending categories that aren’t necessary.
Your financial focus should be on replenishing your fund, so cut out any of these luxuries.
I Heart Budgets offers a few other suggestions forbuilding an emergency budget:
Get rid of your savings buckets.
Depending on how bad the emergency is, I suggest greatly reducing , or even removing this category.
it’s possible for you to’t spend money that you don’t have…
Find alternate transportation.
Also, see if you could find additional ways tobe frugal with necessities.
Trynegotiating your bills, for example (if you haven’t already).
Yes, it’s usually important togive yourself a little breathing roomin your budget.
But youremergency budgetisn’t anything permanent.
It’s a short-term, barebones plan for your state of financial emergency.
As you get back on your feet, you might start adding those “wants” back in.
When I implemented my emergency budget, I gradually gave myself more room to budge as my situation improved.
Lastly, remember to create a budget category for replenishing your emergency fund.
Look for Every Opportunity
In desperation mode, something interesting happened to my outlook.
What I once thought of as a burden I now saw as an opportunity to rebuild my finances.
For example, I was thankful to have overtime at work, even though I normally dreaded this.
I also took on other freelance work.
I started noticing opportunities everywhere, however insignificant they seemed.
Money earned from my credit card rewards?
A small step toward getting back on my feet.
A bag full of clothes I no longer wore?
I could sell them for some quick cash to put in my fund.
It wasn’t much, but it was better than zero.
Of course, not everyone has these opportunities.
Some people are doing all they can and still find themselves lacking.
There are things you tell yourself you’re free to’t afford when you’re broke.
But not preparing for the worst can get you stuck in apaycheck-to-paycheck cycle.
Been there; don’t want to go back.
If my car suddenly broke down, how would I pay for it?
When I did this, I figured I’d get a second, part-time job.
But knowing what I’d do was only one step in my plan.
The next was considering the details.
If I got a second job, how would I juggle that with my current one?
Third, I wanted to set things up so I could implement this plan, if necessary.
Giving a backup plan some thought can help you avoid any desperate decisions.
You want to widen the gap between the amount you spend and the amount you earn.
And there are two ways to go about this: spend less money and earn more money.
I could’ve replenished my emergency fund by simply cutting backspending less.
But I had to focus on theearn moreside of that equation for financially stability.
I built astarter portfolioand gradually learned more about personal finance overall.
But, ultimately, that’s what your emergency fund is there for: to protect you.
Images by Nick Criscuolo,Simon Cunningham,jim crossley,Michael,Caleb Roenigk, andAaron Patterson.
