Set Up an Emergency Fund

“So…we decided to set up an emergency fund that we could not touch unless it was a TRUE EMERGENCY. [...] It wasn’t easy deciding to set aside that cash for an emergency fund that we couldn’t touch, but we bit the bullet and did it anyway. Being able to make mortgage payments and continue to buy food for our family in case of an accident or a lost job is more important than anything else. Living paycheck to paycheck isn’t a fun spot to be in when you have three little mouths to feed. We wanted to put the emergency money in a place where it wouldn’t be comingled with our other money, so I called our banker (I’ve been with the same bank for 12 years) and asked him to open up another savings account just for this purpose. Once that was all set up, we cashed out our CD upon maturity and deposited the entire thing into the new savings account.”

“My first goal wasn’t $18,000. It was $1,000. This is often called a “starter” or “baby” emergency fund. The psychology here is powerful. A $1,000 buffer can stop most small financial problems from becoming debt-fueled disasters. It can cover a new set of tires or a plumbing repair without you having to reach for a credit card. I started by setting up an automatic transfer of just $50 a week from my checking account to my new HYSA. That’s it. It was an amount I knew I wouldn’t miss. Some weeks, if I had extra cash, I’d throw in another $20 or $30. It took me about five months to hit that first $1,000. Hitting that milestone was a massive confidence boost. I had proven to myself that I could do it.”