Build Your Emergency Fund in 5 Practical Ways

Hello, Millennial! I’m pretty sure you have read the last article 7 Financial Goals to Achieve Before Hitting 30If you miss that out, I strongly suggest you take a look at it first. Most of us know all too well to expect the unexpected, because rainy season is just around the corner. That is why to build your emergency fund is a key part of every financial plan. It is hard to predict what curveballs and stones life may throw our way, and we probably don’t have any idea how much it will cost us financially, so building your emergency fund will help you deal with these circumstances.




How much do I really need in my emergency fund? Yes. Some of you may ask. I’ll throw you back a question, “How much do you spend in a month on average?” If this question leaves you thinking, you probably should start minding your expenses and do the math. Averagely, if a person’s expenses amount to Php 20,000 a month, it is a rule of thumb to build an emergency fund amounting to three to six months of expenses. So, that’s around Php 60,000 to Php 120, 000. Woah, pretty huge! Don’t worry and just hang in there because below are some effective and helpful ways to build your emergency fund.

5 Practical Ways to Build Your Emergency Fund

1. Stop spending ASAP.

One of the important numbers you need to understand to build your emergency fund is how much you actually spend. You may be thinking about big numbers such as your monthly rent, food, lights, water, credit card bills, and so on. Now, ask yourself. What about your transportation costs?  What about your daily cup of coffee? Are you buying from Starbucks? Do you have a postpaid plan? Try to be realistic and thorough when you calculate your actual expenses. You should not underestimate your expenses, and end up not having enough.




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2. Treat the emergency fund like an expense.

A not so creative but effective way is to treat your emergency fund as an expense. You can start by setting monthly savings. Set up your funds for automatic transfer to a savings account. Through that way, you will save money without even thinking about it. 10% of each paycheck is already a good start.

3. Try to explore new income streams.

Consider new streams of income for you to save more quickly since additional income can have a significant impact on building your emergency fund. Get a second job. Have passive income. As for me, I started blogging April this year. A week ago, I started monetizing my blog and already earned $149.15 through Google Adsense. Who knows how much it will grow in a month? or in a year? By just creating content and engaging with readers, you can also earn passively. Growing your network, blogging makes you earn money.

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4. Sell your stuff.

If you religiously want to save, take this opportunity to declutter your home and earn money simultaneously. Make use of sites like Ebay, Etsy and Craigslist. You can also have garage sale at your own house. Just a rule of thumb: if you have things you haven’t used in the last three months, you do not need them! Go and sell them. Proceeds will go to your emergency fund. Remember not to cheat on yourself. Don’t steal from it!




5. Do not save too much.

Looking at the other side of the coin, saving can be negative too. It is important to save to build your emergency fund, but having it is an opportunity cost. One is you have cash you can use when it is needed. Second is you have money you could be investing, and in turn, can be used to build your wealth with. That’s why it is crucial to create a budget plan and understand your expenses. As much as possible, plan ahead.

Read more about investing here: Why Millennials Should Start Investing?

To build your emergency fund doesn’t need to be a chore. You can have fun while watching your savings account grow especially when you are fully invested in making it happen.  If you take some time and follow these few tips, you will surely find success in fully stocking your emergency fund. Sooner or later, your peace of mind will be worth all your work. Tip: Don’t forget to start saving on your next pay day. 🙂

If you feel the need to get educated financially, follow The Bright Millennial on Facebook.



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littlemisadvencha is a Filipino Civil Engineer, M.S. student in Structural Engineering and a fur mom of four-legged babies. She writes about her experiences to inspire and educate.

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