Life comes at you fast and knocks you off balance when you least expect it. Financially, that means using and possibly exhausting your emergency fund. And there goes all the money you had set aside for a rainy day! 

I am here now. It is exhausting and draining, truly. Still, I am glad I had an emergency fund to turn to when in need. 

Unfortunately, rebuilding an emergency fund is not as easy as one would wish. First, it is draining going back to the nitty-gritty details of my budget. I struggle with detailed budgets if you know me or have read my previous posts. The sudden changes I am making are also draining my energy and making me anxious as I try to adjust everything. Still, it is inevitable because I do not want to find myself without a fund to fall back on during the next emergency. 

If you are experiencing the same, let’s do it together in the below 5 quick steps:   

First, if you do not have an emergency fund, start here Building an Emergency Fund and Why It’s Important

Steps to Rebuild Your Emergency Fund

1. Revise Your Emergency Fund Level

This might not always apply, but if anything has changed in your life, you might have to revise your emergency fund amount. For example, maybe you moved, and your rent is less or more than it was. Possibly your rent was increased, or inflation picked, and everything is pricier. Perhaps you have an extra mouth to feed. Whatever changes have happened in your life and affect your basic living, you must account for them when calculating your emergency fund figure. 

So, track your expenses for the past three to twelve months. Figure out what has changed during this period in terms of expenses. Then, add them to your emergency fund calculations if they are part of your nondiscretionary spending. 

For instance, I got some pets, 2 beautiful Labrador Retriever puppies and 1 adorable and feisty cat. I do not think anyone prepared me for how hectic it is to have house pets. But besides keeping me on my toes during the meal and playtime, I also have to ensure they are provided for. I am talking about food, treats, toys, medications, and vet visits. Considering the company and the joy of having them around, I’d not trade them for anything else. But I have to adjust my finances to accommodate their needs during the tough times.  

Finally, how many months of expenses are you planning to set aside? There is a golden rule that 3 months of expenses is what you need to set aside in your emergency fund. However, I’d recommend having at least 6 to 12 months. 12 months might seem like a stretch if you are already struggling financially. But it is the best buffer if you are self-employed, do not have a stable job, are on retirement benefits, or have a medical condition. You can start with 3 months of living expenses and then continue to top it to 6 and 12 months. 

2. Put it in Your Budget 

This is where you set aside a specific monthly amount depending on how much you need to raise for your emergency fund. It needs to be part of your monthly budget plan, just like you set aside money for bills and utilities. Allocating your emergency fund contributions to your budget ensures you don’t forget to set the money aside. Or worse, use it for anything else, especially unnecessary expenses. 

If you have automated your savings, the better. Set up automatic transfers from your current account to your emergency savings account after every payday. That way, funds are transferred immediately your salary checks in before you have the time to spend it on other issues. 

3. Cut Your Expenses

As usual, your expenses will come under scrutiny like you are building your emergency fund for the first time. Once we have a full emergency kitty, we tend to relax on our spending. We allocate more money to our discretionary expenses, like ordering more takeout, paying for extra subscriptions we do not particularly need, and so much more. Now, you are back to the first step of securing your financial success, and you must cut all unnecessary expenses. 

4. Pause Other Saving Goals 

While your other saving goals are important, having an emergency kitty you can always count on should always be your priority. It ensures you do not fall back on debts to sort out unexpected expenses. Imagine your financial situation if you had not saved for your previous emergency expense? 

If you were saving to pay off debt, pay the minimum amount for the loans and put the rest in your emergency fund. Were you planning a vacation? Press the pause button, save for the unexpected, and get back to saving for your next trip when you know an emergency will not have you crawling back to digital lenders. 

5. Make Extra Money 

Finally, try to increase your earnings, so you have extra money to save. This is easier said than done, but a few extra coins in your wallet can go a long way in rebuilding your emergency fund. Can you do side hustles or freelance work with your current skills? If you have learned a new skill, can you put it to work and make a few bucks? Is there anything you can sell, like unused items in your house? Can you get a raise from your current employer, or is it time to look for another job? 

Also, keep in mind that making extra money will not happen overnight. Heck, it might even take more than a month or a year to start bringing in that extra income. While it might not come in handy as you try to rebuild your emergency fund, it will help in other financial goals. 

Related post How to make money online

The bottom line 

An emergency fund is a lifeline in your financial success and independence journey. This money is meant to be spent when you are in a fix. So, do not beat yourself up for spending it. But, the kitty must always be full. The sooner you get it back, the safer you will be during your next emergency. Start by tracking your budget, make adjustments, and pause other saving and investment goals.

Have you downloaded the free Financial Success Road Map?