How to Create an Epic Emergency Fund With Any Income: 2022 Edition!

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Ah, The Emergency Fund. Something we all take for granted, yet we all need it when sh*t hits the fan (and believe me when I say that sh*t will always hit the fan). There will always be a blown out tire, a trip to the emergency room, or a broken dryer to just immediately crush your financial goals. That’s a given.

But there’s a simple solution to help you fight off emergencies when they happen. That solution lies in a pool of money, i.e. your emergency fund, to rush in and save the day!

So in this post we will explore a few things including what exactly an emergency fund is and is not, why you need it, how much you need in it, how to create your fund including some creative ways of making money, and where you need to put that emergency stash of dough. It’s okay if you don’t know how to create an emergency fund, because by the end of this post, you’ll be an emergency fund pro.

“When it rains, it pours…and it will rain.”-DollardollarNOW.com

The Emergency Fund: What it is and What it’s not

The Emergency fund, also called a “rainy day fund,” is a a collection of saved money for unexpected emergency expenses that you can’t cover with your regular income. The money is this fund is often held separate from other savings accounts and is crucial to a strong financial plan.

I often call this money “emergency insurance,” because it helps to insure you with needed emergency money and ensure that you don’t go back into debt because of that emergency.

An emergency fund is money that you have just in case some crazy emergency makes you pay a ridiculous amount of money that you wouldn’t normally be able to pay with a normal paycheck.

I’m not talking about, “dang, we forgot the $20 dollar prescription medicine in the budget,” or “I have to pay for that oil change this month.” This fund covers big costs, like blown car transmissions, new refrigerators, broken heat and/or A/C in the house, and other large emergency situations that may come about.

What it is

✅An Emergency Fund is a Tool

An Emergency Fund is a tool to help you get through life, because life can be really tough sometimes. Life throws a lot at you. With an Emergency Fund, you can always be ready for life. I use it as a tool if there is ever anything crazy that happens to me.

Unexpected pipe bursts in your home? Yep, I just had it happen a few weeks before I wrote this post. The cost? $3,766 dollars. But I wasn’t stressed, because I had that money ready. You need a fund ready for these insane times in your life.

✅ An Emergency Fund is a little bit of help

A fully-funded 3-6 month emergency fund SHOULD cover almost everything life throws at you. I mean, there really aren’t a lot of $10,000 dollar plus emergencies. But on the off chance that your emergency is more, and you need more, at least you had that amount to start. It’s at least a little bit of help.

If you don’t have enough to cover the whole cost of the emergency, you still have something to put towards the cost. $10,000 dollars towards a $12,000 dollar hospital bill is a good start. Normally you’ll have a little bit of time so you can just cash flow the rest.

✅An Emergency Fund is a Buffer

Have you ever heard of Murphy’s Law? Well, According to Wikipedia.com’s article here on Murphy’s Law, it’s an old adage or epigraph that basically states, “anything that can go wrong, will go wrong.”

Just think about the worst day you’ve ever had. That day kept getting worse and worse, right? You thought to yourself, “what else could possibly go wrong?” The same applies to those who don’t have a fully funded emergency fund set up. Those in the worst financial positions tend to have Murphy knocking on their door the most. Those people have “emergencies” all the time because they’re not being smart in their finances. Well, that’s when Murphy likes to strike.

I remember those days very clearly. We weren’t being wise and intentional with money and we had stuff going wrong ALL THE TIME. So make sure you have your fund to give you at least a little bit of a buffer against Murphy.

The funny thing is, those who have their fund set up tend to not have as many emergencies happen to them. This has been us for the past 12 months now. Now that we’re consumer debt free, we barely have anything go wrong. The burst pipe was the first emergency in over a year…and it really wasn’t that bad financially.

What it’s not

🚫 An Emergency Fund is NOT a Christmas Fund

As much as it at seems like it comes up quick, Christmas time happens every year. Every single year on the dot. December 25th at 12:00 A.M. signals Christmas Day. It is NOT an Emergency. Money sitting ready for emergencies should not be spent on Christmas presents. When saving up for Christmas, you need to use a separate savings account, not the emergency fund.

🚫An Emergency Fund is NOT pizza money or bar money

Your money sitting ready for a true emergency shouldn’t be used for pizza or drinks at the bar or for anything else other than something disastrous. And no, a fashion emergency doesn’t count.

🚫An Emergency Fund is NOT an investment account

We’ll talk about how much to put into your emergency fund in the next section, but you need to understand that your emergency fund is absolutely not an investment account. We are in no way looking to gain money off of our emergency fund. This fund is for EMERGENCIES and it is been put in place to protect you. We don’t care about earning more money in this fund.

Now, if your money is put into a bank account that earns 1% interest and grows a little bit, that’s awesome. But that’s not what we’re shooting for or what we care about. I could care less about the money you or me earn in our emergency account. 1% interest is nothing. Just make sure your account is fully funded and ready to back you in any emergency situation.

Lastly, this article here on the Dave Ramsey website, “3 Questions to Ask Before You Use Your Emergency Fund,” will help you know whether you should use your emergency funds or not.

“There’s always something coming in a few months that will cost money. So be prepared.” -Rachel Cruze

How much money do you need in your emergency fund?

A fully funded emergency fund will consist of 3-6 months of your necessary household bills and expenses. The amount will vary depending on your individual household, so you and your family have to ultimately choose exactly how much. But the average fully funded emergency fund will be around $10,000-15,000 dollars.

Before you start this process, I want you to stop and assess your situation. If you HAVE CONSUMER DEBT, you’ll need to keep a one thousand dollar starter emergency fund while you get out of debt. If you DON’T HAVE any consumer debt, keep going and let’s build that emergency fund!

So again, the amount you need in your emergency is going to vary. This is where you need to make sure you’ve created a budget and know exactly how much your necessary monthly bills and expenses are.

If you haven’t created a budget, I highly recommend checking out my post, “7 Ways a Zero-Based Budget is the Best Budget for Your Money,” to make one and learn exactly what your necessary monthly bills and expenses are. I want you to know exactly how much the necessary required expenses are for your family for one month (bills and necessary expenses like groceries and gas only – how much it costs to run your household).

It also depends on how stable your situation is. If you’re a single income or self-employed household, and a job loss or disaster could really hurt you financially, you need a 6 month emergency fund.

If your family has two state employees, and an extra income from blogging like my family, you probably only need 3 months of expenses. We have 3 months. If your jobs are highly stable, you probably only need 3 months.

But it’s up to you. The number will fluctuate with your situation. So figure out exactly how much you need. Most financial advisors and coaches will agree with these numbers. Just make sure you have at least 3-6 months in there. You have to be ready for emergencies because they will happen.

How to create an epic emergency fund with any income!

Now we can finally dig in to the meat and potatoes of this post. There are hundreds of ways to create your fund. Just as with the amount of money you will need in your fund, how you decide to create your fund is completely up to you! This is where you can get as creative as you like. This is where I suggest to you two words: GAZELLE INTENSITY. It doesn’t matter what your income is, just get intense and get it done.

Whether you decide to work extra, sell stuff, open a business, or scavenge the streets for cash, do so with epic intensity. You’ve intensely paid off your debt so don’t stop now! Get this emergency fund fully funded as fast as you possibly can because it’s important to have this protection in place!

Here are 7 ways to create your emergency fund

Remember when I said epic intensity? I want to give you a goal for the emergency fund: I want you to have your 3-6 months of expenses set aside in an account in 6 months or less. That’s intense. Now go get it!

1. Use your extra money from not having debt

If you’re truly out from under the chains of debt slavery, you should have some money left over from your debt snowball. Use all of that extra money from not paying debt anymore to build your emergency fund up as quick as possible! Whatever you can find extra in your budget should go to building up that money fast. Let’s say you’ve decided on $12,000 dollars or 3 months of $4,000 dollars in expenses.

If you can put $1,000 extra dollars toward your emergency fund for 6 months, that’s $6,000 bucks. Good start. Add that into your starter emergency fund of $1,000 dollars and you now have $7,000 dollars!

2. Sell stuff

The most immediate way to build your emergency fund is to sell your useless junk. Let’s be honest – everybody has a ton of useless junk and stuff they don’t need in their house that can be sold for cold hard cash. Here are some other good ideas of stuff you can sell to build your fund in a post written by savingslifestyle.com.

Sell that stuff today and get your emergency fund ready for when you need it. If you can make an extra $200 per month for 6 months, that’s $1,200 dollars. Add that to your other money that’s already saved ($7,000) and you now have $8,200 dollars! Almost there.

3. Work overtime hours

This can be easy for a lot of folks, because most workplaces want their employees to stay and work harder and longer. Whenever I work my full time job in law enforcement, a great way for me to get extra money to fuel my blog is through working overtime. I regularly put in about 10-20 hours of overtime per month. That extra money is great and can go towards whatever I want. My blog, my investments, an emergency expense, time off, or just whatever. Use OT and build your emergency fund up quick. If you can earn an extra $500 per month this way, you’d be up to almost $11,200 dollars.

4. Get a part time job

For those that can’t get overtime and just don’t have any more stuff to sell, pick up a part-time job. Uber, Doordash, and Dominos both allow you to make around $10-15 dollars per hour. If you can’t make money from OT, trying working part-time. If you can bring in $500 bucks a month from this, that would be $3,000 dollars over 6 months and you’d be up to $11,200 dollars.

5. Start a small side business or side hustle

Get your entrepreneur on and start yourself up a small side-business or side hustle. There lots of ways to make money this way including old school labor-type jobs like cutting grass and cleaning pools for $30 bucks an hour, walking dogs, shoveling snow, or even crocheting baby blankets and selling them on Etsy. Whatever you decide to do, finish getting your emergency fund set up! If you can make a few hundred extra dollars to finish out your goal of $12,000 dollars (or whatever you’ve set it to), that’s all that matters.

6. Start a blog, internet business, or YouTube channel

If you’re extra motivated, don’t mind being patient for a while, and putting in A LOT of work, then building a business online could be for you. Before this blog, I put in over a year of effort before I saw a few dollars on my other site that I built: DiscgolfNOW.com.

But it paid off. A year of writing and building finally saw about $100-200 per month of passive income. Two years of work saw about $400-500 dollars per month of income. A complete redesign and another year of work saw about $1500 dollars per month. I was ecstatic. Finally, I was able to put premium ads on the site and it started making over $2,000 dollars per month pretty consistently (with my best month being $4,000 dollars!). You, too, can build a site like this. You just have to put in the effort.

Other online businesses include starting a YouTube channel, online stores, and like a thousand other avenues to create extra income.

7. Use your talents on Fiverr and create stuff and/or sell services to people

I’ve never personally done this, but if you’re creative enough you could make extra money in a ton of different ways on the Fiverr create platform. Check it out!

Other ways to make money online

If you’re not interested in some of the ways I’ve listed above to make money for your emergency fund, I challenge you to scavenge the internet looking for more ways to make money to build your fund. Check out Time Magazine’s Article here called, “30 Clever Ways to Make Money Online.”

So where should you put your emergency fund money?

That’s the $64,000 dollar question. Or $10,000 dollar question. Or, well, whatever amount of money you’ve set as your goal for your fully funded 3-6 month emergency fund. So where should you put your emergency fund money?

You should put your emergency fund money in a standard savings account at whatever bank you do business with. This emergency fund money should never be invested in any way and it needs to be a separate savings account from any other savings accounts that you are currently using to save up money.

Again, it should NEVER be invested because you need to be able to access it fairly quickly. I don’t care about making money off of this account because it’s for protection against emergencies. And if it’s in an investment account, and your account loses money due to the market, you might not want to actually use it if an emergency happens.

Your money should NOT be held in cash because that’s too easy to get ahold of and used. People who are not disciplined need just a little bit of friction between them and their money so it’s not used for non-emergencies. A savings account is perfect.

Your money should be held in a savings account. Not an investment account, not in cash, and not in your checking account.

Here are a couple of places that you can use for your emergency fund:

Savings account connected to your checking
Money market account
High-yield savings account

Here’s a great video, from the folks over at Ramsey Solutions, that kind of explains why these are great places to keep your emergency fund.

Conclusion

YOU HAVE TO HAVE AN EMERGENCY FUND. This fund is so important. Once you’ve paid off debt and move toward wealth building, this fund is one of the most important parts of protecting your financial plan. If you don’t have one, it’s time to build it up ASAP. Because life happens. I mean, it’s going to rain, so you need to have your rainy day fund ready to go for when the storm hits. It could mean financial disaster if you’re not ready.