Back to Basics: EMERGENCY FUND

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Before paying down debt, before investing, before the more 'sexy' parts of personal finance:  you must build an emergency fund.


Your circumstances will determine how much your emergency fund should be, but before doing the math, I encourage you to grab your planner, journal or scrap of paper and think about your why.

What will this money mean for you? Is it the freedom to leave a job that makes you unhappy? Is it a foundation to ensure your family is taken care of? Maybe you want to have a safety cushion before tackling your debt, thus avoiding the cycle.

Every personal finance person I admire or like to follow talks about the importance of this. It is branded in different ways, but it is basically all the same: “What are you working for?” “Your rich life,” or “You can afford anything but not everything.” Financial health is a long journey, figure out where it is you want to go. 



Now that you’ve figured out why you want to begin a personal finance journey, it’s time to start building the emergency fund.

It is highly recommended to do this in a High-Yield Savings Account (HYSA) not attached to your checking account. Most of them are able to be linked, but transfers take a few days to complete. This little buffer is another barrier between you and pulling from those savings accounts for non-emergency purposes.

Figure out how much your monthly expenses are. You can use tools like this one from Nerdwallet or calculate what 3, 6 or 12 months of expenses look like for you by writing everything down on paper or using a spreadsheet. I recommend doing whatever method makes you most motivated.



Once you have calculated what your emergency fund should look like, it’s time to pick a HYSA. All of the ones online are pretty similar so don’t stress too much about which one to choose. As long as it is FDIC insured and a decent APY%, you’re good to go.

Open up the account, even if it is only with $20. Starting is one of the most important steps. If you can deposit more, I recommend that of course. Don’t let that be the barrier from keeping you opening the account.

Once you’ve opened the account, if you have a consistent paycheck, set up an auto-deposit on every payday to build that fund. Use what is left for your budget and variable spend. Set a savings goal that is challenging, but achievable.

If you are a freelancer or have inconsistent income, get into the habit of manually saving a percentage for your taxes each payday, in addition to your savings goals. Do this as soon as your invoices are paid to make sure it is taken care of. Use the money left to budget for your needs and other variables.


If you are new to saving, it can be difficult to get into the habit. You can only cut expenses so much, so frugality can be a tool, but shouldn’t be the main focus as you start saving more.

Now that you know how much your monthly expenses are, add up ALL income. Is there a gap between what’s coming in and going out? Can you earn more money? Perhaps ask for a raise at your job, work a side-hustle with what you have, find a new job entirely? Set an income goal for yourself and start taking steps to get there.


Why is an emergency fund the most important goal when starting out on a personal finance journey? Before investing, even before aggressively paying down debt, this emergency fund is the biggest priority.

If you are working on paying off high-interest credit card debt, it can be tempting to save at a slower rate and focus on debt. What can happen though, is if an unexpected expense pops up and there’s not an adequate savings to cover it, more often than not, it’s going right back on the credit card.

On a personal level, having cash in the bank gives me peace of mind. I know if I lose income or a large expense pops up, I don’t have to lean on my credit cards for support. Saving the first $1,000 was the hardest, and now I’m aiming for my next milestone, $10k !

Learning to build an emergency fund has helped me build great savings habits. Once I reach my 12 month goal, I will roll those savings to other goals! These rollovers will continue to happen as I achieve goals and the process will get faster over time.

If you are a person who benefits from structured accountability or feel anxious about personal finance, I highly recommend working with a trainer at The Financial Gym. I have been a member for over a year and a half and it is the best investment I make into myself and finances each month. Use MY LINK to schedule a free warm-up call.

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