An emergency fund is money that you have put aside to cover any occurrences of financial shocks, such as losing your job, grief, becoming ill, or something breaking, to name a few. The aim is that you add to it each month so that should something unfortunate happen, you have the reserves to be able to support yourself and not stress about finances during times of emergency. If you don’t have one in place it can feel intimidating to get started—especially with the current economic uncertainty and those pesky rising expenses putting a strain on your financial well-being.

However, with careful planning and strategic actions, you can navigate these challenging times and safeguard your financial future. Here’s how:

Step One: Create Your Bare-Bones Budget:

It sounds more intimidating than it is, but by creating your bare-bones budget you can get a detailed look at exactly how much you need to survive each month. If you’re not sure what your expenditure would be, try tracking your expenses for a month to get started. Your bare-bones budget should only cover essential expenses—think along the lines of housing, utilities, groceries, transportation, and debt payments. By taking a detailed look at what’s needed, you can identify potential areas for saving ready to redirect what you can towards your emergency fund.

Step Two: Prioritise Reducing Your Debt:

If you have debt, addressing it strategically is crucial. High-interest rates can cause you to get stuck in making interest-only repayments—and you don’t want that! Instead, look at all of your debts and create a debt repayment plan with prioritising the most expensive debt first.

Step Three: Negotiate!

When you’re looking to reduce your financial commitments, don’t be afraid to negotiate. Exploring your regular outgoings and negotiating costs can help to stretch your budget even further. For example, speaking with your energy provider to negotiate a reduced rate, speaking with your phone provider to negotiate a different tariff if you’re not using your full benefits—and the same with the gym, if you’re only able to go on set times. Having a conversation with someone can make a huge difference—for example, by proactively reaching out to service providers for my car insurance, mobile phone plans, broadband, and Sky, I successfully negotiated better prices. This resulted in monthly savings totalling £124!

Step Four: Start Small and Automate Savings:

If you’re not in a position where you’re ready to go all-in on saving for your financial plan, set up an automated amount to leave your account each month and go to a dedicated savings fund. Even a small amount saved regularly can accumulate over time, and by automating the process, you’ll make it a normal part of your routine, making it easier to set aside consistent contributions each month and not rely on willpower alone!

Step Five: Generate Additional Income:

When disposable income is limited, finding ways to generate extra income can make a significant difference. In this digital age, there are numerous side hustles or part-time job opportunities that you can explore, as people are always looking for short-term contractors with various skills and interests. For example, freelancing, writing, gardening, or e-commerce to name a few.

Step Six: Celebrate The Milestones

When you’re saving, and have big ambitions, getting to your goal can feel like a mission. However, building an emergency fund takes time and perseverance. So ensure you take the time to celebrate your milestones along the way. Set mini-goals and reward yourself when you achieve them. It can feel counter-intuitive, but this positive reinforcement keeps you motivated and engaged in the saving process, even when progress feels slow.