Painless Ways to Grow Your Emergency Fund

Over the past years of pandemic and recession, too many of us learned that our emergency fund — if we had one — fell woefully short when needed. Others found their retirement nest eggs shrinking. But the lesson is the same. "It's important that this realization be accompanied by a resolve to dig in and correct the problem," says Gerry Hafer, a certified Social Security adviser at the senior-supporting AMAC Foundation. "The most productive way to do this is to build a plan and establish a budget designed to bring cash outflow in line with inflow, but allowing for at least a portion of available cash to be set aside. Even if it's only a few dollars." Read on for suggestions on how to tweak finances to create a cushion with as little pain as possible.

The first step is to figure how much money you need, remembering that doesn't involve trying to keep up with the spending of a neighbor, friend, or relative. Some say a cushion should equal three to six months of your salary, while others say 10 times your monthly expenses — but the real answer is whatever you can afford to set aside. "You have to find out what works for you and your situation," says Lauren Silbert, vice president of personal finance site The Balance. "Is your job stable, or could you easily find a new one if needed? Do you live in a low cost-of-living area? Do you have kids? A medical condition? All these things will contribute to how much you should save. The more high-risk your situation, the more you should try to save."

Related: 50 Ways to Prepare for a Recession

No matter which way you choose to build an emergency fund, the idea is to keep in mind how good achievement feels. "Setting goals not only motivates us, but can also improve our mental health and our level of personal and professional success," Positive Psychology says.

Related: How to Make a Monthly Budget and Stick To It

Starting an emergency fund from scratch may feel impossible, but the point is not to get discouraged or overwhelmed. That's why you start small, working out a way to save small amounts consistently. "Starting at all is a huge first step, and you'll be surprised how quickly even small amounts can add up over time," Silbert says.

Related: 7 Best Money-Saving Tips for Gen Z

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If you thrive on support and encouragement, take a pledge at America Saves, a campaign managed by the nonprofit Consumer Federation of America, which "motivates, encourages, and supports low- to moderate-income households to save money, reduce debt, and build wealth." The site offers reminders, tips, and resources to help you meet your goal.

Related: Financial Advice for Households Making Under $75,000

Keep an emergency fund separate from how you pay bills, in its own "home," and think about how to get the most out of whatever bank you keep it in. "Is it in a savings account or a money market account? Remember these funds should be accessed without penalties, and you should think about placing them somewhere with interest so it can grow over time with or without additional investment," Silbert says. 

Even better than thinking about how to keep your emergency fund separate is to never have to think about it all. "You can also set up automatic transfers from your checking account to your savings, so money is set aside each month without even having to think about it," Silbert says. 

"I never watch pay TV," said virtually no one locked away at home during the pandemic. But as life transitions to a new normal, you won't want to vegetate in front of a screen when you can visit with friends, go to the movies, or attend a concert in person. Dump at least one stream or premium channel; if you need a video fix, look into Kanopy, which streams for free through many libraries and educational institutions.

Related: Which Streaming Service Gives You the Most Bang for Your Buck?

If you're swayed easily by a deal — if you open an email and suddenly find that something you'd never even consider is a must-have, just because it's on sale — skip those temptations. Unsubscribe from emails from stores, and toss out catalogs without a look if they come to your doorstep. 

Cut back on daily expenses — the classic example being that Starbucks coffee drink you buy every day, which you can replace with your own great coffee at home. First you may need to identify what you don't "need." That might demand "a complete look at your current spending patterns, perhaps involving journaling everything you buy for a period of time and trying to spot the 'wants' and separate them from the 'needs,'" Hafer says. 

Take time to think, really think, about those needs versus wants. Before a shopping spree, the rule is: "Sleep on it." You'd be surprised at how you realize you don't really need another pair of leggings, however cute or cheap, in the cold light of morning. Besides, we all have closets full of clothes just waiting to be worn, in public, again.

Related: Ways to Simplify Your Finances During a Time of Economic Turmoil

Your closet is probably stuffed with clothes that no longer feel right, especially if you skipped the Marie Kondo craze. There have been countless stories in the past years about the impact of COVID-19 on our changing feelings around clothes. Sell the things you'll never wear again at a local consignment shop or online outlets such as Poshmark (or if you are or were strictly a name-brand diva, luxury sites such as The RealReal).

Related: Where to Sell Clothes for Quick Cash

Savings can get a big boost when you deposit extra money such as a generous birthday gift, tax refund, or work bonus instead of using it for a splurge. "If you're still building your fund and you come into money unexpectedly, put that straight into your emergency fund when possible," Silbert says. "Consider it a gift to your future self." 

Sometimes it's easier to bring in more money than to carve savings out of current income. If you discovered a skill you love during the pandemic, do it for money — a craft such as knitting to sell on Etsy or maybe making baked goods you can sell locally. You can also capitalize on your spare time, talents, and hobbies to earn extra cash. "Are you good at writing? If so, many small-town newspapers and local magazines often take on freelancers to handle assignments. Like to drive? Local delivery services seem to be popping up continuously, whether its grocery delivery, fast food delivery, even the local hardware store," Hafer says.

Related: Tips for a Successful Side Hustle

Looking at your debt and doing a little research — comparing interest rates on credit cards — is another easy way to address ways to save. After the research, just apply and use the issuer's customer service reps to move debt to where you'll need to pay less every month. "Especially if you have heavy short-term debt, like credit card debt or installment loans, most financial counselors will advise you to inventory the annual percentage rates on all your loans and credit card and, wherever you can, transfer balances to the lowest APR," Hafer says.

Related: Tactics for Getting Out of Debt

Check out credit cards that offer cash back, and make that card your preferred card. "You'll be surprised at how fast the cash-back awards add up, especially if that's your sole card," Hafer says.

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Take a look at your surroundings and see if there's a way to increase cash flow from what you already own. "If you own property, it also might pay you to consider a home equity loan as a pathway to paying off high-APR debt," Hafer says. "The net savings from taking this step could serve as a steady addition to your savings account." 

Everyone wants the restaurants of America to recover, but we don't have to eat out often, or extravagantly. The pandemic turned many people into serviceable (and in some cases, expert) home cooks. Reconsider the ease of the drive-thru window or the "no-occasion" meal out and pocket that money by making delicious meals at home.

Related: 100 Cheap & Easy Dinners

You may be surprised how much money you can save if you simply empty your loose change into a jar every night. When those coins reach the top, roll them and turn them in at the bank — avoiding supermarket machines, which are easier but take a percentage of the money. 

Even when gyms closed during the pandemic, there were still ways to exercise. Reconsider what you really liked about that time — perhaps you fell in love with walks at your local park and now can't envision going back to the treadmill. Investigate the best investment for what you will use; perhaps a pay-as-you go structure is a better option. 

We got used to less frequent services during the pandemic, from haircuts to manicures, lawn services to car washes, and that lesson should stay with some of us. While you won't turn into a millionaire by forgoing one or two haircuts or car washes per year, you will be able to add a little extra to your fund. 

People who found progress on their retirement savings derailed in the past years might look to Social Security's early filing option as an easy way to replenish their reserves while continuing to work. But it's a last resort. "The discounted benefit will be with them for the rest of their lives. With life expectancies these days generally surpassing the break-even point on which the Social Security's actuarial calculations are based, early filing tends to work out negatively over the long haul," Hafer says. Drawing benefits while working will also likely fail Social Security's "'earnings test" of $21,240, resulting in a partial repayment.

Related: Ways to Get the Most Out of Social Security