Subscribe to the newsletter!


A Step by Step Guide to Get Started Budgeting

step by step guide to get started budgetingThe idea of budgeting can be a polarizing thing.

A lot of people are put off by it because of preconceived notions and confusion about how to best go about it.

If you had mentioned the word ‘budget’ to me a few years back, I probably would have looked at you strangely and dismissed it. Because, hello, who really wants to sit down and do the tedious task of looking over your spending.

Thankfully, budgeting doesn’t have to be some tedious mind destroyer if you don’t want it to. It can actually be pretty fun to do. It’s all about picking the right system and tools that work best for you.

My first foray into budgeting came when I was 18 and in my first year of college. I was working a lowly food prep position at McDonald’s and trying to figure how my money kept vanishing into thin air.

So, I downloaded the free budgeting tool Mint and got to work tracking my spending within the service. Suddenly for the first time, I was able to monitor my transactions while making goals and assigning set amounts to different spending categories.

It was kind of like a game of sorts. Being able to see how savvy I could get by staying within my set amounts for spending categories. The most prominent one being the food and groceries category, because let’s be honest, that one was a chaotic mess of late night drive-throughs, takeaway coffee, and one too many pizza deliveries.

Mint was cool but over the years, I started to want something more. To see what else was out there. Through some trial and error, I started to find my groove with budgeting.

So far, its led to hitting some pretty sweet financial goals. I was able to ditch a blue collar job I hated, move abroad for a year and a half, pay off $21,000 in student loans within 18 months, and build up a good-sized emergency fund.

If you’re ready to get organized with your money and better work toward your goals then keep reading. Here’s a step by step guide to budgeting.

Start Tracking Your Spending

Do you know where you’re money is going every month? Not in the vague “oh well I think I spent around this much on entertainment…” but in the “I spent this exact amount on entertainment last month”.

It’s easier for your money to feel like it just disappears when you’re not actively tracking it. $11 here, $18 there. It doesn’t feel like much until you add it all up.

Tracking your spending combats that. It makes you more conscious of spending decisions so you can prioritize better on what matters most to you. And hey, maybe that priority involves buying concert tickets or getting a dog. It’s all up to you!

Everyone has different priorities but tracking one’s spending is helpful to everyone.

There are a few ways to do it. You could use an Excel or Google Sheets spreadsheet and input it manually. For online options, a free tool like Personal Capital lets you track your spending as well as monitor your overall financial picture.

Figure Out What Motivates You

You can’t start budgeting if you’re not sure what your motivations are. A lot of people falter with budgeting because they don’t have a clear reason why they’re doing it.

Think back to some big achievements you’ve done (maybe it was getting a dream job, hitting a fitness goal, or saving up for something) You probably had a strong reason why. Channel that same inner grit into your financial goals. You’ll have a much better shot at sticking to your budget this way.

Figuring this out can take some time (i.e. it’s not something you can sit down and do within a half hour). Think about your ‘why’ during moments when you’re getting ready for bed, taking a shower, or other idle moments.

To help you stay motivated, employ some of the tips below:

  • Figure out a plan for what to do when temptation arises
  • Enlist friends help by telling them your motivations
  • Use visual reminders (whiteboards are good for this!)
  • Surround Yourself with disciplined people (personal finance facebook groups can be great for this!)

Create Financial Goals

The main purposes of a budget are to help you become mindful of your spending as well as helping you reach your financial goals in a more organized and strategic manner.

No more wingin’ it and hoping for the best. The stuff that gets measured gets improved.

Think about what financial goals you want to accomplish. These could include:

These are typical goals that people often have in common. Don’t forget to think about other goals you may have. These could include saving up for a new computer, education expenses, a new phone you want, books, or any number of things.

Think of both short-term and long-term goals you would like to hit. Make sure to look at what you value as you commit to your financial goals.

If you’re a movie buff who loves going to the cinema every week to see the latest, then cutting out going to the movies isn’t going to go over well. Cut back in other areas and brainstorm ways to do things cheaper. If you like to eat out a lot then download an app like MealPrepPro. Use something like MoviePass if you see a lot of movies.

Get small and specific with the goal. For example, saving for retirement is boring. Saving for retirement so you won’t have to live on $1,200 a month and eat beans and rice for every meal is better. You feel me? Good.

Studies show that setting small goals and checking them off motivates us to accomplish those big hairy audacious goals (BHAG) like paying off student loans or saving for something big.

Ask yourself:

  • Why exactly do I want to achieve this goal?
  • How will my life look differently by achieving this goal?

Select a budget system

Envelope method: Revolves around using cash only. You withdraw the amount of money you need for the month, put it in envelopes, and then once the money inside the envelope is gone, that’s it. You have to wait until the next month starts before spending in that category again.

Zero Sum budget: You give every dollar a job. Your budget should be zero at the end of the month. This budgeting style can help if you have a habit of mindlessly spending money on things once you pay all of your expenses.  

The awesome book, Zero Down Your Debt goes more into this. The authors used this budgeting method to help them get out of $50,000 of debt and go on to work for themselves.

50-20-30 budget: A percentage based system where 50% goes to your needs, 20% goes to your savings and debt repayments, and 30% goes to your wants.

Category budget: You assign amounts to different categories and aim to keep spending under that amount.

Choose your tools

I’ve used a selection of different tools in my budgeting journey. As I mentioned at the start of this post, I started using Mint when I was 18 and in my first year of college. For simplicity, pen and paper have also been used.

The pen and paper method didn’t work for me too well since it was completely manual. Sometimes life would get busy and I would totally forget to write down my spending. Using an online service like Mint really helped keep me on track. Currently, I’m on a free trial of You Need a Budget (YNAB) and seeing how I like it. Testing things out for the win! 🙂

Below are some different tools you can use to budget.

Pen and paper: Simplicity sometimes beats the rest. If you like writing out your expenses by hand and keeping track of spending and receipts, then you could just use a simple pen and paper or write in a notebook to budget.

Excel spreadsheet: Spreadsheets really make some people jump for joy. They can be pretty great since you’re able to input your spending and have it push it to the appropriate category and total everything for you.

You need to have Microsoft Office installed on your computer. Alternatively, some budget spreadsheets also work in Google Sheets (the free excel alternative).

Mint: Mint is that popular budgeting tool you’ve probably heard about countless times, but never really learned more about. Lots of people use it because it’s a free cloud-based service (rather than remember where you put your excel spreadsheet on your computer.) that is simple to use and categorizes your spending. 

You connect your bank account and set goals for your finances. Sign up for a free account

YNAB: You Need a Budget is similar to Mint, but it employs the specific approach of building a zero-sum budget and giving every dollar a job. It allows you to set goals, track your progress, see your spending trends over the long term and teaches you to live on your income from the last month. You budget based on what you have already earned.

It’s a paid tool that costs $6.99/month. A free 34-day trial is offered. Judging by some Reddit threads and online comments, a lot of people swear by YNAB and its many benefits compared to Mint. Sign up here

Personal Capital: This free financial planning tool allows you to budget and also monitor your net worth. You can get a full picture of your financial life by syncing your bank accounts along with your investment accounts and any assets or liabilities you have.

Sign up for a free account and get started with monitoring your spending, savings rate, and being able to monitor your overall net worth.

Whew! A lot to go through to build a budget. It’s all worth it though. Going through the steps listed and you’ll be well on your way to building a budget that works for you.

Budgeting isn’t about restricting yourself. It’s about giving your money a plan. As with a lot of things in life, budgeting doesn’t come without making a few mistakes here and there. Use this step by step budgeting guide and experiment based what works for you.

Forgive yourself, break down your goals, and create some daily actions. It’s how you get successful with budgeting. Let me know how it goes!

How did you get started budgeting? What tactics and tools worked best for you? 

How to Build a Mini Emergency Fund While on a Small Income

how to build a mini emergency fund on a small income

Being financially prepared for when an emergency strikes is important. Life happens. Things break. The last thing you want to be doing is having to put an unexpected expense on a credit card with 20% interest.

Emergency funds are essential. They give you peace of mind when something pops up. They keep you from that crippling situation of feeling stuck and without options.

Now, there are two big things to know when it comes to emergency funds. They’re really hard to build and people often underestimate how much they need in one.

For the longest time, I couldn’t really master the concept of emergency funds. I understood the essential nature of them but couldn’t for the life of me figure out how to properly build one.

It seems pretty self-explanatory at first sight. You save money out of each paycheck, put it in your savings account and BOOM! A nice little cash fund you can use as your for rainy days (or more like raging storms).

Although I never felt successful in my efforts towards building and maintaining one. Back in college, I would routinely skim a little off the top whenever I was feeling a late night supermarket run. As I worked first post-grad job, I would use the account as a catch-all for vacations, emergencies, and any other savings goals. Whenever an actual emergency happened and I used the money from the fund, I would get unmotivated since my savings were set back.

It was a beautiful mess. Beautiful in the sense that my emergency fund account had an assortment of ~wonderful~ nicknames I changed whenever the mood struck (cash by senseless, dollars in vogue, etc). Mess in the sense that I didn’t have a consistent savings habit that helped my emergency fund stay strong, no matter how much I was making.

Let’s face it. When you’re in your twenties, building an emergency fund can be especially hard. You have to deal with several savings goals like student loan repayment, car payment, house downpayment, weddings (yours or attending friends) and the generally high cost of living that comes with living in a major city.

Saving the recommended 3-6 months of expenses is freaking hard. However, I’ve learned that having a small and growing emergency fund is better than no emergency fund. Given that I’ve had an emergency fund throughout several periods of my life (broke college student making minimum wage, recent grad making entry level, and working professional making $1200 a month) I’ve learned some things about how to build an emergency fund while on a small income.

Negotiate Your Bills

Auto insurance is such a pain. When I would look at my statement every six months, it would give me aches with how much I was paying. If I had paid attention to the latest television infomercial, I would have immediately canceled my plan and gone for one of those seemingly sketchy places that advertise for “low low low” auto insurance costs.

I like my auto insurance (USAA), so instead of choosing between a sketchy place or continuing to pay what I was paying, I called them up. I chatted with the customer service team about how I was thinking about leaving. After not too much time, I was able to get a lower rate! My record of not having any recent accidents or traffic violations probably helped, but it never hurts to call and ask.

There are four bills off the top of my head that you could negotiate: auto insurance, internet/cable bill, cell phone bill, and student loans.

Internet providers are infamous for raising your rates after a one-year period. Call up and ask about promotional offers. Check out lower cost cell phone providers like Cricket Wireless or Republic Wireless.

I pay $40 a month for my Cricket Wireless service, which uses AT&T’s network, for unlimited talk/text and 5GB of data.

If you have a lot of private student loans, consider the option of refinancing. Check out LendEDU for refinancing options.

Track Your Spending

You may think you’re “good with money” because you don’t do common money trappings like subscribing to cable or eating out a lot. Bar hopping isn’t your kind of thing and you’re loyal to your Keurig coffee maker, so buying lattes all the time isn’t even a thought.

Status level: responsible. Right?

Well, not completely. If you’re not tracking your spending, you can never get a full picture of your financial situation. Tracking your spending helps you uncover money leaks, unnecessary fees you may be paying, and areas to trim.

There are a few ways to do this.



Personal Capital

A notebook is pretty self-explanatory. You write down your purchases and at the end of the month, tally it up. Mint is a free money management platform that lets you track your cash flow and expenses.

Personal Capital is a free money management platform, similar to Mint, but with a lot more features. Some describe it as “Mint on steroids”. With it, you’re able to not only track your income and spending but also your investment accounts and net worth. There is a financial planning tool within the service as well.

You can sign up for a free Personal Capital account. Seeing the visualizations of your cash flow and investments can really help you stay motivated towards your goals.

Once you start tracking your spending, you could see areas where $5 here or $10 there goes. It may seem small, but small progress is better than no progress.

Create a Separate Savings Account

Having your savings account parked right alongside your checking account at the same bank isn’t the option when building a mini emergency fund on a small income.

Several months ago I opened an online savings account with Ally Bank. My savings account earns an interest rate of 1.25% APY. This is 125x the interest rate that my old savings account was at a traditional brick and mortar big bank.

Ally Bank even has a calculator where you can see how much more money your savings account earns in interest being at Ally versus other traditional banks. You won’t get rich off of a 1.25% APY but it’s sure as heck a lot better than the 0.01% your savings account is probably earning right now.

Aside from the interest rate, having your savings account at a different bank keeps you from being tempted to dip into your savings during non-emergencies. When you can’t see the money constantly, you’re less tempted to spend it.

Look for Additional Income Streams

When you’re building an emergency fund while on a small income, there comes a point when you can’t cut back anymore. You have to grow the gap between your income and expenses by looking for ways to make extra money.

You could look into different side hustles and part-time jobs. Part-time jobs could include things like waiting tables, working at a grocery store, Amazon Flex, and other jobs where you have to be at a place at a set time and for a set number of hours.

A side hustle is different than a part-time job. Usually, it has some flexibility to it. There are short-tail side hustles and long-tail side hustles. Short-tail ones allow you to get up and running and start earning relatively quickly, these could include driving for a rideshare service like Lyft, babysitting, or doing deliveries.

Babysitting (Use and ask around in your area)

Dog walking/pet sitting (Rover, DogVacay)

Delivery (Postmates, DoorDash)

Rideshare driving (Lyft)

Waiting tables

Taking Surveys

Short tail side hustles are great for being able to help you build up an emergency fund quickly while on a small income. However, if you’re truly looking to expand your income streams, it’s worth looking into long-tail side hustles.


Freelance Writing

Graphic Design

Web Design/Development

Virtual Assistant


Think beyond just what’s in front of you when you’re looking for ways to make extra money or grow your side hustle. The best book I found for getting into a problem-solving income potential mindset was Chris Guillebeau’s side hustle book about going from a side hustle idea to making money in 27 days.

What if instead of just driving for Lyft, you created a website centered around educating rideshare drivers on things and providing them with helpful information. Harry from The Rideshare Guy did just that.

Let’s say you do dog walking via Rover for a side hustle. What if you studied the best practices, learned what dog owners are seeking most, and improve your client list by implementing the things you learn. You could consider developing your own dog walking business.

Meal Plan

Meal planning is one of the best things you can do to cut down your food spending. A lot of people spend more than they need to when it comes to their monthly food budget.

Meal planning is often thought of as tedious and time-consuming. While it isn’t the simplest thing to do, it is far less complicated than people make it out to be. Sites like The Minimalist Baker and Budget Bytes provide a lot of healthy, simple, and budget-friendly meals you can try.

$5 Meal Plan is a meal planning service you can look into If you’re looking for simple, weekly meal plans. If you’re into writing stuff down, get a meal planning notepad to keep track of recipes.

Building up an emergency fund isn’t easy. It takes some creativity beyond just cutting your expenses. Getting to the recommended e-fund of 3-6 months expenses can take a while. Don’t focus too much on that set amount.

Focus on building a mini emergency fund of about one month’s expenses. It will give you peace of mind and keep you from going into panic mode whenever some unexpected expense comes up.

Additional Things to Try

Ebates: Use the cashback site Ebates for when you shop online. Ebates allows you to earn cash back when you shop through their portal at more than 1200 stores. When you sign up for Ebates, you’ll get $10 bonus after making your first purchase.

Ibotta: Use Ibotta to earn cash back on purchases you make in store. Get a $10 bonus when you sign up and make a purchase.

Utilize water more often: Pre-made and single-serve drinks can add up to so much money after a while. Not only that, but they’re usually loaded with a lot of sugar. Use the water from your sink and buy some low-cost drinker flavorings, ice tea mix, Crystal Light, or Kool Aid. 

How To Develop a Money Mindset

how to develop a money mindset

Note: This is a guest post written by Jacob of Dollar Diligence

Having a financial background is always beneficial when it comes to managing your money, but you do not have to have a financial background to be able to handle your expenses.

In fact, I did not have a solid financial background or any type of economics training when I finally decided to tackle and pay off my student loan debt.

I just did it.

In this post, I want to share some tips about becoming financially savvy. I want you to be able to benefit from the advice and I want you to feel confident in your ability to manage your finances and break up with your debt, if you have it.

Don’t Give in to Your Wants

It can be easy to want, want, want, especially when the newest TV hits the shelves or when the latest phone is ready for purchase. Yes, we all want these items, but we do not need them. In fact, that TV you have in your home probably works just fine and your phone does exactly what it is supposed to.

While it is okay to indulge a bit, you do not want to overspend or overindulge. You need to learn how to be frugal. If you do, you will quickly find that you run out of money and you do not have the funds you need to pay off your obligations.

Don’t Dwell on Your Past Financial Problems

While your financial problems from the past will still exist, there is no reason to dwell on them and doing this will only cause you more financial stress. It is important to stop the habits that caused your financial decline in the first place, but they do not have to rule your life. You should take a step back and look at the whole picture. This way, you can determine what you need to do differently and how to do it.

You want to learn from the mistakes you made and avoid doing it again.

For example, maybe you used a credit card incorrectly and racked up a ton of debt. Once you have the opportunity to get a new card and a second chance, don’t spend your plastic money wildly. Or, maybe you have missed student loan payments in the past, but are now finally set on paying them off.

Don’t fall into old habits. Come up with a goal, create a plan for achieving it, and don’t settle for anything less.

Have an Emergency Savings Account

It is scary to see that most Americans do NOT have a savings account and those that do often carry a balance of less than $1,000. What happens if you were to lose your job or you were to experience a serious disaster. Most people would have nowhere to turn and they would be left in a serious bind.

It is important for you to make sure you plan for your future and that you start an emergency savings fund. Most experts recommend that you have three to six months worth of bills and expenses saved up in case something was to happen.

If you decide to follow the six-month plan, how much would you need to have in your savings account? For example, if your monthly expenses are $2,300, then you would need to have $13,800 in your emergency savings fund to cover you for six months.


Do not take a backseat approach to investments or a retirement account. It is important that you have these because you will need them, especially if you plan to retire in your life. IRAs and 401Ks will allow you to start a nice retirement fund and you can even double your savings should your employer offer a plan that matches the amount you contribute.

Experts say that if you wait to invest in your retirement account then you will need to save a minimum of half of your paycheck by the time you are 40. Most people will NOT be able to this and I definitely know I would not be able to.

Be Careful with Your Credit

You credit score is not just a score and it tells potential lenders and creditors how well they can trust you to pay your obligations. If you have a poor credit score, you will find it is difficult to take out an auto loan or mortgage, be approved for student loan refinancing, or even rent an apartment.

Credit cards, late payments, and loans all affect your credit score, so if you plan to take out any loans or borrow any money, then you need to be responsible with it. Too many late payments can affect your score as well and it is HARD to recover once your score takes a nosedive.

Don’t Give Up – You’ll Get There

The most important thing to keep in mind is to keep going and not to give up. I was able to pay off $25,000 in just 15 months. I never thought it possible, but it was and I know that you can develop the mindset to pay down your debt as well. You do not have to be a financial wizard to free yourself from the chains of debt.

What has your journey been towards becoming financially savvy? How did you develop a money mindset?

Jacob is a high school math teacher by day and personal finance blogger by night. Follow his journey at @DollarDiligence!

how to develop a money mindset

But How Does It Make You Feel?

saving money doesn't have to feel like a sacrifice

Saving money is important. Duh! Right? Everyone likes to save money. Unless you’re one of those lucky souls who won the lottery and ride your Ferrari off into the sunset. For the rest of us, we like saving money.

At least I think people do. Most people would give a quick yes when asked if they wanted to save more money. If you read any of those “x tips to save more” articles on the interwebs, then you know the routine.

Cut your cable subscription, brown bag your lunch, and make water your friend rather than your carbonated pal, Coca Cola.

These are all often repeated tips. Why? Well, because they work. Lots of people do or have them and they can gain from cutting them out. The obvious gain being the saving money part. I mean, do you really need to buy a $10-15 takeout lunch every day of work? I don’t think so.

After doing the cutting back, you’re left with a nice little pile of newly available funds. You usually have a few options: put the money in your emergency fund, invest it, or use it to pay down debt. All solid options.

Making yourself be good with money usually starts with cutting back. The art of really understanding your wants vs. needs. The benefit is clear: you save more money! *fist pump*

Are there any other benefits? This is where people usually draw a blank. They’ve saved their money. There doesn’t appear to be any other advantages.

Well, pull up a chair because your impromptu saving money therapy session is about to start. Put your phone away, don’t check social media, and grab a piece of paper for notes. Let’s begin with a story.

For a long time, I struggled to give up my excessive TV viewing habit. There are just so many good shows! I used to be super into TV. I watched it, rewatched it and loved going over the different plotlines and stories. I even had an old blog where I used to write reviews of movies and television.

I was hooked.

While I’ve never had a cable subscription (#millennialstatus) I did use my parents and friends subscriptions to keep up with shows. When I finally decided to cut down on my TV viewing habits, it was difficult.

It was difficult because there was nothing tangible for me to see from cutting down on my TV viewing. I didn’t have a cable subscription, so it’s not like I was saving money by cutting a bill. Sure, I did have more time in my day, but the added time hit me like it hits most people: I didn’t know what to do with the time.

I sat around, did some extra writing, read some websites. Nothing substantial. However, through a slow progression, I started to see positive results. Without spending so much of my time watching TV, I was able to start studying Spanish again, I picked up a hobby in photography, and I started freelancing again.

Check out some of the photos below that I’ve gotten of Australia so far!

Australia work holiday visa
The South Australian Dingo Fence. Longest fence in the world!
Australia working holiday visa
Squinting while at The Breakaways in Coober Pedy, South Australia


Cutting down my TV viewing helped me feel better.

Every day I had something to look forward to. Instead of being huddled by my laptop watching the latest episode of Casual, I spent my time on Duolingo doing Spanish lessons. I watched YouTube tutorials to improve my photos. I sent out more pitches for freelance gigs.

To be honest, all of those new activities still involved me sitting in front of my computer, haha. However, I’m building my identity capital. Doing stuff that fuels me and really makes me feel good (rather than just that ~shook~ feeling I got after binging the latest season of Orange Is The New Black).

The same feeling came over me when I started cooking more rather than eating out all the time. Back when I was living in Thailand, it was easy for me to eat out. I didn’t have a kitchen (yes, really 🙁 ) and eating out in Thailand was inexpensive. I could usually get a meal for 50 or 100 baht ($1.50-3.00 USD). Imagine my shock when I got to Sydney, Australia (a.k.a one hella expensive place) and I realized eating out would break my budget…a lot.

Side note: visit Thailand rather than Australia if you wanna stretch your dollar further!

Once I started actually learning how to cook, my food expenses went down. It would have been easy for me to look at the savings at the ultimate be-all benefit, but it wasn’t. The biggest benefit was I started to feel better. Turns out, processed snacks and soda all the time really isn’t good for you :).

Ask yourself how your expenses and cutting back on some of them will make you feel. Sometimes you may have to cut back in order to gain more (ex. Cutting back on TV to make more time for freelancing). Maybe it will prompt you to pick up something else like a new hobby or activity. Whatever it is, don’t just see the cutting back as a way to save money. It’s always more than that.

Saving money is about more than just saving money. How does it make you feel? Click though to read about how to approach cutting back in a positive way.

Not Another Emergency Fund

how to build an emergency fund

Can you ever have too many blog posts talking about emergency funds? Personally, I think so but others might disagree. The “blog post talking about an emergency fund” has been done over and over again in the personal finance world. And this post is about to be another one 🙂

When I first started reading personal finance blogs, I was a soon to be university grad who didn’t have a lot of money in savings. I read countless times about the importance of an emergency fund and why everyone needs one. It helps in case of unexpected expenses! Job loss! Your car breaking down! You need it!

I liken the experience of it to that of being told to eat my vegetables growing up. It should be something that happens but I still don’t listen to it all that often. I mean, you have to actually set aside money for some hypothetical event. When you have things constantly eyeing for your attention at the current moment, saving money for future emergencies can fall through the cracks.

However, I’ve always known of emergency funds. Even as a money newb who first started reading personal finance blogs, the concept of money set aside for emergencies was never foreign to me. I don’t think it’s foreign for most other people either.  

Even as a money newb who first started reading personal finance blogs, the concept of an emergency fund was never foreign to me. I don’t think it’s foreign for most other people either. 

People know unexpected expenses pop up. They know they should have money set aside for an emergency. The problem lies in people’s perception of an emergency fund. Many people don’t fully know how an emergency fund works (problem one) and they usually underestimate the amount they need in one (problem two). 

For the longest time, I thought an “emergency fund” was the small amount I had in my savings account. I also thought it was the leftover “buffer” amount I had in my checking account after I paid all of my bills. Most people think of emergency funds along this same line.

Having this way of thinking led me to dip into my savings account for not so critical reasons. I would take money out when I really wanted to buy some nice, but unnecessary, thing or when I would go on a vacation and need money for it.

Constantly seeing the money sitting in my bank account made me feel okay to spend it. Everything about my way of thinking of emergency funds was misguided.

An emergency fund is a dedicated account used only for real emergencies, like a job loss, medical bills, car repairs, and so forth. It’s not for when you really want to buy new clothes. It’s not the money that’s left over in your bank account after you pay your bills. That’s a buffer, not an emergency fund.

For the best chance of growing and keeping an emergency fund intact, people would be better off putting the money in a savings account at a bank different from where they do their day-to-day banking. Doing this helps when you’re someone who isn’t a natural saver.

Online banks come to the rescue with this. They’re best when it comes to holding an emergency fund. Ally Bank’s 1.00% APY for accounts blows past the traditional average 0.06% APY.

How much to keep in an emergency fund? There’s two common rule of thumbs: $1,000 in a starter emergency fund, then leveling up to 3-6 months of expenses stashed away.

Do what makes you feel most comfortable. From my senior year of high school all the way to after graduating university, I had the same old Ford Focus that I had bought on my own. Fully paying for my car at age 17 felt awesome but having to go through car repairs every year because the car was old was not so awesome.

My car situation and job situation were the two biggest things that influenced my emergency fund. It’s why I kept way more than $1,000 in an emergency fund while I was paying off my student loans.

Two big reasons I want to keep a good sized emergency fund now is because, one, I will be moving back to the states in the next year. That’s gonna entail moving around and getting a new job, a.k.a major money vacuums.

The second reason is because of an experience I’ve long fantasized about since I was a kid: buying a car with cash. I got a taste of this when I bought my first car at 17 and paid for it in full on my own. The current car I use, a Smart Fortwo, is completely off.

So, for the next few years, I won’t be buying a car with cash, but it’s still on my list. Walking into the dealership, they ask me how I’m going to finance the vehicle, I put on sunglasses and gaze into the distance and say “I’ll pay with cash.” Then they’ll look in shock as I put down the cash or write a check (<–do people still use those?).

I’ve been watching too many movies, but yeah, that’s kinda how I see it playing out.

Overall, I keep a good sized amount in my emergency fund because I’m aware of my own situation, spending habits, and priorities.

How much do you keep in an emergency fund?

1 2 3 6