How to Build an Emergency Fund (Even If You’re Broke)

Most articles on building an emergency fund are full of crap and boring reused tips that don’t really work.

Inflation is high AF and people of all ages have burned through a lot of their savings just to keep food on the table and a roof over their heads.

Instead of giving you useless advice that doesn’t work, I will share with you my advice on how I built a rock-solid emergency fund that covers 6 to 12 months of my personal living expenses (3 to 6 months if you have dependents such as children).

How to Build an Emergency Fund

1. Set a Goal Based on Your Monthly Spending

Figuring out your spending will help you build up 3 to 6 months of emergency funds because you know exactly what your financial goal is. When I started building my emergency fund in 2018, I knew I needed around $1,000 to $1,500 per month (I live in SE Asia) to pay my bills.

My goal was to save $10,000 so I could sleep at night not worrying about bills or unplanned expenses.

Many of you are living in the United States where $1,500 barely covers your rent. You probably need at least $4,000 per month if you’re single (add $1,000 for each additional person in your household).

Aim for 3 months then keep adding more money to buy yourself more time in case of an emergency.

Emergency Savings Goal Based on Your Region

  • United States: $12,000+
  • Europe: $8,000+
  • Asia: $5,000+
  • Africa: $3,000+

Struggling to Save Money? Increase Your Income or MOVE

If you are struggling to save money in a HCOL (high cost of living) area then increase your income or MOVE to a different city.

Ask your boss if you can work remotely then move to a cheaper city to save money.

Move back home with your parents or relatives to save money.

I took things to the extreme and moved 8,000 miles away from Washington, DC to a completely different country. Things aren’t perfect in SE Asia but I have a nice fat emergency fund that helps me sleep well at night.

2. Choose Your Type of Emergency Fund Account

Next, you need to choose which type of account will hold your emergency savings.

During my early 20’s, I kept my emergency savings in a high yield savings account to earn interest.

However, I transitioned from a high yield savings account to Bitcoin in my 30’s as my preferred emergency savings. Although it’s unconventional, I found myself more likely to hold onto my Bitcoin longer than fiat money such as the US Dollar.

HYSAs are the most basic option while Bitcoin is a more advanced type of emergency fund.

3. Automate Your Savings by Paying Yourself First

My mom always told me to pay my bills first then save what’s leftover since that’s what my grandfather did back in the 20th century. However, I ended up with over $17,000 in credit card debt during my first year of college following this strategy.

Screw that! You work too hard to pay other people first before you pay yourself.

Pay yourself first! Setup an automated transfer from your checking account into your savings account so you send money to your emergency fund BEFORE anyone else gets paid.

Another strategy is to pay yourself 10 to 50% of every dollar you earn by investing in Bitcoin or another stable cryptocurrency.

4. Lock Away Your Savings and Only Use it For Emergencies

Too many people build up an emergency fund only to spend it on useless junk from China or stuff you don’t really need.

I consider an emergency only as a “life-altering” event that cannot be ignored.

Everything else is BS so don’t spend your emergency savings on stupid people or junk products because you will regret it in the future.

5. Set a Long-Term Goal of 1+ Year and Keep Saving

Don’t stop adding t your emergency fund once you reach the standard 3 to 6 months. A lot of crazy stuff can happen to you or your family so prepare for the worst and hope for the best.

Don’t Give Up…You Got This!

I was flat broke at age 30 before I moved to SE Asia so anyone can do this. If you live in a HCOL area then you can build an emergency fund fast since you have greater access to higher paying jobs.

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