Episode #16: Saving For An Emergency Fund - 10 Tips To Save More Quickly
How well prepared were you financially, to lose your job during the pandemic. Maybe you were lucky to be able to continue with your work, but conceivably, had you lost your job, how well equipped were you to handle it? Would it have sent you into a tailspin of panic, desperately looking for the next job that came along right away just to make sure you paid your basic bills that month? Or would you have been frustrated, but been able to sit back, take stock of what was happening, maybe take a break to process everything, and then slowly, on your own time, started working on choosing your next career path, without all the panic and fear that was flying around.
The difference between these two scenarios is having a sound emergency savings fund to see you through the bad times, and in today’s episode, we’re going to talk about what an emergency fund is, why you need one, 10 ways to save yours up really quickly, and where you should store it for safe keeping, hint? Not in a box in your closet!
If you’ve followed along for a while, you’ll know that I feel really strongly about emergency savings funds. At the start of my working life, I worked hard to build up an emergency savings fund quickly, because I’m a worrier, I’ve always been self employed, and I needed that financial safety net to feel comfortable and happy in my life. If you caught episode #6, you’ll know that I like to think of this separate savings account, not as an emergency fund per say, but as an F* you fund, aka the savings safety net that will always give you the freedom to say F* you, and walk away from a bad situation that’s not serving you well. Whether that’s a bad client, a bad boss, a bad roommate or relationship. The F* you fund is freedom, and everyone should have one. Beyond that though, I also got to experience the true value of an emergency savings fund when the pandemic started and my main business at the time, a successful wedding photography business, was forced to shut down, almost entirely, for well over a year. I basically lost two years of income from my wedding photography business, and while I wasn’t happy about it, I was completely okay because I’d built up a big emergency savings account that I knew would cover my basic life costs for at least a year if need be. After that experience, I believe whole heartedly that every single person living and working here should have an emergency savings account for their financial security, life autonomy, mental and physical health and well being, and it’s my personal mission to teach people about this and that’s what this episode is all about.
The biggest roadblock a lot of people have about creating an emergency savings account is feeling like they’re living paycheck to paycheck, or barely have any disposable income leftover after their monthly expenses to build their emergency fund, and I hear you, it’s not easy. So, for today’s episode I’m going to highlight 10 ways you can look at temporarily cutting back and finding some unexpected savings in your life expenses, so you can build your emergency fund up quickly and efficiently, to sleep better at night and start to buy yourself the freedom and peace of mind that you deserve.
To begin, I’m going to walk you through the 4 steps of creating an emergency fund. If you want to learn these in more detail make sure you go tune into episode #6.
Establish what your necessary fixed life expenses are every month and every year. These are the expenses that you have to continue to pay to live, no matter what, even if you lose your job or your income.
Decide how much time you want to buy yourself. Don’t follow any of the prescribed ‘rules’ that you’ll find on the internet, I want to encourage you to think about your life, the type of job you have, your job security, your own individual safety net and decide for yourself how much time you want to buy yourself with your F*** you fund. Personally I always have at least a year’s worth of fixed expenses in my fund, because my first business my wedding photography business worked on an annual cycle, so a year was enough time for me to pivot or make changes as needed. For years that was viewed as an extravagant amount of money to have in a fund like this, but after watching what happened during the pandemic it doesn’t actually seem all that crazy.
Decide how you’re going to temporarily funnel more money into building up your emergency savings account.
Decide where to keep your emergency fund somewhere that’s liquid cash, easily accessible, and that still earns you the best interest rate available without being invested, so you money isn’t sitting dead in an account somewhere. This means you want to store your emergency savings fund in what’s called a high yield savings account that offers a higher interest rate than most bank accounts.
So, hopefully the idea of having an emergency savings fund, and F*** you fund, a financial safety net or adulting comfort blanket sounds really appealing to you, and you really want to get started saving for it. BUT when you look at the dust bunnies rolling through your bank account, you’re just not sure how you’re ever going to get there. First, you are NOT alone, and second, I’ve got you, hang around because now I’m going to walk you through 10 ideas for temporary changes you can make to uncover some unexpected savings in your life, and start to build your own F*** you fund.
1. Look at what you can do to reduce your biggest cost of living, your home or apartment. These days a lot of people are paying well over the recommended 30% of their salary to having a place to live, especially in expensive big cities or surrounding areas like where I live. While I know you love having a place to yourself, your own apartment, if you want to save up an emergency fund quickly this is the first area I recommend looking at reducing your spending. Whatever your situation is, chances are you can reduce what you’re paying for your living situation, but you have to choose what works for you. Whether that means moving in with roommates for a while, moving back home with your family for a while, subletting a room out, air B & B ing a part of your house. The choice is yours, but this is a great way to save at least hundreds of dollars a month that you can funnel straight into building that emergency fund, and it will grow quickly this way. Once you’re fully funded, then go back to your previous living situation, this time knowing that you’ve got your safety net in place that will allow you to stay there in case you lose your job.
2. Re-negotiate your bills. There are a lot of bills you’re probably paying that you can negotiate to a lower price, or cut down on the offering you’re signed up for for a while. This could be entirely it’s own episode listing bills that you can renegotiate or lower, but for a quick list I recommend looking at bills like your phone bill, internet, insurance rates, cable bills. Call your provider and spend some time renegotiating your contract and bills with them, whether this means asking what new deals and promotions they have on, moving to a ‘smaller’ package for a while, or bundling bills and services together. This is something that really should be done every year, as most contracts like internet services will sell you on a cheap promotional package for the first year, and then up your bills as soon as that promotion is done. Just get in the habit of reviewing your bills anyways and seeing where you can negotiate and lower them, or change companies.
3. Remove subscription services from your credit card. It’s so easy to let subscription service charges build up on our credit cards these days, and when you add these up over time they end up costing you a lot of money every year. But there are probably some subscription services on there that you either don’t use, don’t get enough value out of, or that you can move to using the free version for a while just while you’re getting your emergency fund built up. Do things like cancel all the extra streaming platforms you have, don’t pay for amazon free shipping if you never actually order from amazon, move to the free version of spotify for a while and just put up with the ads, it’s worth it for the peace of mind your F*** you fund will bring you. Cancel the gym membership you’re not really using and set up a running buddy system instead for a few months. There are all kinds of recurring payments that we just let slip away because they don’t feel like that much money at the time, but if you cut down on a few of these for a while to build your emergency fund, it’ll add up quickly and you’ll be able to get back to your spending life as normal that much faster.
4. Take on a few gig work shifts for a while. If you’re having a hard time cutting down on your expenses even more, then let’s turn our attention towards how you can temporarily increase your income rather than decreasing your spending. While I’m not a fan of the gig work economy, it does provide a lot of opportunities to earn some extra cash on your spare time. And remember this is all about temporary changes you can make that will help you save your emergency fund up faster, I’m not telling you to start driving for ubereats full time. If you want to make a couple hundred dollars extra a week though, look into taking just a fraction of your free time and putting it towards an easy gig job instead, you might even like having something else to do that gets you out of the house.
5. Commit to eating at home for a month. This means not going out for dinner, not ordering in dinner because you’re tired, not picking up lunch on the run because you couldn’t pack yourself a snack lunch, and not ordering coffee out. All it takes is a bit of advanced planning, thinking about meals ahead of time, and being okay with grabbing a banana and a jar of nuts for lunch sometimes when you’re running low on time. You will be freaking amazed by how much money you can save JUST by eating at home, or bringing homemade meals with you for a month. Yes, your grocery bill will go up that month, but you’ll absolutely in the long run save way more money by eating at home, as long as you don’t use this as an opportunity to kit yourself out with the best home espresso machine and more fancy spices than will fit in your cabinet. The key here is to have an idea of what your monthly food budget is, including eating out, then tracking your grocery budget for that month and contributing the savings to your F*** you fund. I’m willing to bet you actually start to enjoy your homemade food way more over time, and eventually won’t be nearly as enchanted by an expensive starbucks latte, as you are with the homemade latte you can make with whole milk, in your favourite mug, with actual fresh cinnamon instead.
6. Commit to a month without consumer spending. This means not buying anything new for yourself that you don’t ‘need’. And don’t let yourself get loose with your definition of ‘need’. Cutting back on purchases like clothes, books, things for your apartment, will save you loads of money over time, and it’s an easy spending habit to cut back that won’t feel like you’re putting yourself through any sort of hardship. Giving up your apartment to live with roommates for a while to save money, that can be a challenging way to save money quickly. Not giving in to whatever instagram ads are pushing at you this month? Not a hard way to save. If you have any consumer spending in your life, I highly recommend looking at this tip as one of the easiest ways to save some extra cash to contribute to your emergency fund faster. Plus, when you directly compare the peace of mind you’ll get from having a full F** you fund vs. a new coat that barely fits in the closet with all your other coats, I’m pretty sure the peace of mind will easily win your heart, hands down, every time.
7. Re-evaluate your fixed expenses. Depending on what your fixed expenses are, this can be a more extreme way of finding savings. By definition fixed expenses are things you can’t really cut out, but you may be able to cut down on how much you spend on them for a while. This could include things like gas, food budgets, and other bills. Maybe you can bike or take public transit instead of driving, if you have to drive, maybe you can arrange a ride share to have someone else chip in for gas. There could be ways you can save on your grocery bills, from buying in bulk, to walking a bit farther to the cheaper grocery store in the next neighborhood, to relying more on meal planning around sales and promotions from your store that week. While some people absolutely are living on a bare bones budget and can’t cut back any more, there are also a lot of people who can find ways to cut back and save a bit more each month, it just takes time. And if this is important to you, if you have time to watch a show at night, you have time to sit down with your numbers and find a few corners you can cut to save money faster to reach your goal sooner of filling up that emergency savings account.
8. Offer a skill you have as a freelancer. If you don’t already have a skill that comes to mind, spend a bit of time learning something you can specialize in and offer your services for. There are numerous sites where you can offer your skills that require no financial or advertising input for you. Sites like Fiverr, which I’ve linked in the description for this episode, are a fabulous way to earn some extra money off of a skill you have. From simple graphic design, to copy editing, to photo or video editing. If you’re remotely creative, or if you’re just really good at grammar, you can find a way to offer that skill on a site like fiverr to other people whose skills don’t extend into that area. You absolutely do not have to invest in things like a website, or advertising, or anything like that to run a profitable little service based business for yourself. Just offer you skillset through a site like this, or to your own network, and earn a few extra dollars from odd jobs you can pick up practicing your skill. If you’re feeling unsure about this idea, or have no clue what your skill is, think about this. Marie Kondo built a freaking empire that started out as her offering her ‘decluttering’ skills to clients one on one. She literally went into people’s homes and taught them a new way to fold socks in their drawers, and helped them take stuff out of their closets and put it into trash bags. If that is a valuable skill, I guarantee you can get creative and find something you do that other people need. And who knows, what starts off as a way to save money for your emergency fund faster, might just turn into the next marie kondo empire.
9. Declutter your life and list your items to sell online. Or, go old school and have an old fashioned garage sale! Don’t literally throw away money you spent in the past. Again, this falls under the, if you have time to watch a show at night you have time to list your old boots for sale online category. If saving up that emergency fund is important to you, set aside the next weekend to declutter your closets, desks, drawers, and garages, and then offer those things for sale.
10. Save money on interest payments. If you’re carrying credit card debt and paying high interest rates on that debt. A lot of cards in canada have interest rates of between 20 and 30%, which is absolutely massive, and it’s a gigantic waste of money. You have the option to use what’s known as a balance transfer card. These cards offer a lower interest rate, usually from 0-4% for a fixed promotional period when you first register for the card. So you can sign up for the card, transfer your existing credit card balance to that new card, and aggressively pay it off over the next few months without having a high interest rate dragging you back one step for every two steps you take forward. Now, this means funneling much higher payments into your card to pay off credit card debt for a few months, but after that, provided you don’t spend yourself into another hole, you’re going to be saving lots of money that would have otherwise been going towards paying just the interest on your credit card. You can then take these interest payments, which you were making anyways, and move them over to your emergency savings account. Again this will help you build it up faster AND will help keep you from wasting money on the absolutely inane expense that is credit card debt.
And there you have it, 10 ways you can look at temporarily reducing the expenses in your life to help you create a fully funded emergency savings account faster. The most important thing to remember is that what I just walked you through here is not a strict budgeting system that won’t let you have any fun. These are just temporary ways you can save up for your goal faster, and then you can go back to living your life and spending money comfortably, this time with the absolute peace of mind that comes from knowing you’ve created your own financial safety net that’s got your back.
Where should you keep your emergency savings account?
Remember, this money is there for emergencies, not to finance a bigger and more expensive purchase that you want to make. So, it’s really important that you set up a separate account that you will store this money in that’s not that easily accessible to you on a daily basis, BUT you still need this account to have easily accessible liquid cash for you to take out if you need it. This means not investing it in stocks, or even something safe like GIC’s because those still tie your money up for a period of time. When you’re choosing the right bank account for your F*** you fund, look for what’s called a High Yield Savings account, and choose the one that has the best interest rate available, without locking your money in for a period of time that means you lose the interest rate if you take it out before then. There’s always a neck and neck race between banks for this #1 position, so don’t be afraid to change when your high interest rate expires, or you find a better offer. I currently use EQ bank for my F*** you fund, but I’ll probably transfer to tangerine bank next time they have a promotion that tops what I currently have. If you’re interested in finding the best high interest savings account at the moment, I always keep that updated over in the financial resources library of the how to adult school website.
Want to learn more? Check out the resources below!
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3-Day Personal Finance Challenge: Break up with broke and start building financial confidence https://howtoadultschool.com/personal-finance-challenge-download-page
First-Time Home Buyer’s Guide: Everything you need to know before buying your first home https://howtoadultschool.com/first-time-home-buyers-download-page
Expense Tracker: Finally feel in control of your spending with this easy-to-use tracker https://howtoadultschool.com/expense-tracker-download-page
My favourite personal finance tools:
Wealthsimple (High Interest Savings, Investing & TFSA/RRSPs): My favourite platform for personal banking AND investing wealthsimple.com/invite/OB9NB7
EQ Bank (High-Interest Savings Account): Another great option for high interest savings accounts (for Canadians) join.eqbank.ca/?code=CORYNN4617
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