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5 Steps to Your First $1,000 Emergency Fund

ave Your First $1,000 in Emergency Savings Teddy Bear Emergency

Everyone and their brother recommends an emergency fund and I’m no different.  Emergency funds make sense.  We all know we should have one, but how do you start an emergency fund?  If you’re just starting out in your financial journey I am going to walk you through how to save your first $1,000 for your emergency fund. 

1. Open up a high interest savings account

The first step is to open a high interest savings account.  I recommend keeping your emergency fund in a separate account from your checking account.  This can be done at the same place you keep your primary checking but it’s not what I recommend. 

I suggest opening a separate online savings account at a separate bank or credit union.

The key is to keep your emergency fund separate but easily accessible.  For me that means I can get my funds within 2-3 business days with a simple transfer.  Also I prefer to keep my true emergency fund in cash money.  Not gold, silver, or stocks. 

Where should I save my emergency fund?

$1,000 Emergency Fund Savings Ally Bank

I’ve grown to love and adore Ally bank’s online savings account.  Here’s why:

  • One of the best interest rates in the business
  • FDIC insured
  • Amazing customer service, almost too good
  • Allows 1 account with multiple savings buckets or goals like down payment on a house, car, emergency fund
  • No fees that I came across pretty simple account and that’s what I like

Anyways enough of the love fest over here for Ally.  Open a separate online savings account.  Do your research for what’s best for you and Just Do It!

2. Eliminate, Negotiate,Reduce

The high interest savings account is open, but your account needs money.  I often get the statement from financial coaching clients  “I don’t have any money to save”. 

How do I really know if that’s true?  The first place that we look is your expenses.

  • I suggest you go through each expense and ask yourself if you can or want to eliminate the expense?  
  • Then I suggest doing some research on the company and it’s competitors.  After this research is complete I want you to call them and tell them you want to cancel.  Simply tell them that you want to cancel because the monthly bill is too high.  Explain to them that ABC company has a similar service for a lower price.  This tactic alone will often yield results.  If this does not work it may be best to switch to the competitor after all they are offering a lower price.
  • Finally if they are unwilling to reduce the monthly expense it may be best to ask for a reduced plan or service to lower your monthly bill.

Eliminate, Negotiate, Reduce Example

Cell phone.  

First off you have to ask yourself do you want to eliminate your cell phone cost?  In 99% of the cases you need and want your cell phone.  Unless you are my 70+ year old father who often tells me he wants to throw this piece of $h*t in the garbage, for the rest of you elimination is out of the picture.

If you have one of the big carriers like Verizon, AT&T, or T-mobile chances are the price you are paying is more than it needs to be.  Let’s trim that expense.  Do you research on what company has a better priced plan out of the big companies.  Don’t forget to research the smaller companies like Republic Wireless, Mint, or GoogleFI as the cost savings is much larger.

Make that call.  I’ll spare you all the details, but I did write about a similar experience with my cable company that I suggest you use as a script.  Rahmit Sethi also has a simple script to use for a few things including cell phone bill (Requires email subscribe for the download).

Once you are on that phone, relax and stick to the script as it’s designed to reduce your monthly expense.  Congratulations on following through to save money for your emergency fund.  

When you find ways to cut expenses and save money make sure to add these amounts to your emergency fund plan in step four (4) and automate in step (5). One step at a time though.

Spend less than you make and then save that money towards your $1,000 emergency fund!

3. Sell your stuff 

If you look around your house you have a few things sitting in your closet, garage, or attic that you don’t use or wear anymore. Sell it!

I remember one of the first things I sold when I was paying off debt and saving for my emergency fund.  It was a Kelty travel backpack that I used during college when I had a 1 month class that sent me from Scotland all the way down to London.  The backpack was just sitting there and I hadn’t used it since.  I sold the backpack for over $80 and added it right to my emergency fund.  

Once you have all the items you want to sell take a few pictures, write a description to captivate the buyer, and list them on a popular selling platform.  Facebook Marketplace, Offerup, eBay, or Craigslist, to name a few.

Sell your stuff and add that to your brand new emergency fund.  These funds will be treated like special rocket fuel, more on that in step five (5).  Don’t count on this occurring every month as part of your plan.  Speaking of plans.

4. Have a plan

You are probably wondering why “Have a Plan” is number four (4) on the list.  Great question.

When you first start out going to a gym do you have a plan or is the real accomplishment to just show up?  The hardest part is just showing up, not anything else.

That’s why opening that account is so important.  Looking for “extra” money in your expenses and selling stuff you don’t use anymore is the right order.

I want you to get excited about opening that account.  Get excited that you are able to save money.

Here’s the next big step, have a plan.

How can I save $1000 emergency fund?

The goal is simple, save $1,000 in an emergency fund.  Now we need to put a timeline around this.  This could be six (6) months or 1 year, whatever fits the amount of money you can save each month.

If your goal is to save $1,000 in six (6) months that would mean $166.67 each month into your high interest savings account.  

If your goal is to save $1,000 in 12 months that would mean $83.33 each month into your high interest savings account.  

When you think about $1,000 it sounds massive.  But when you break it down into little monthly savings each month it becomes less of this big massive number and instead something you can chip away at.

Once you have that plan in place let’s set it up for success!

5. Automate 

I have an alarm wake me up every day Monday-Friday at 6:30 am.  I do this because if I had to remember each day to wake up on time or set an alarm every night, I would forget. 

What I have done is automate my schedule to wake up.  My Siberian husky angel appreciates this greatly, especially in the hot and humid Miami, Florida.

Automate.  Yes I want you to take your plan and set up an automatic transfer every month for your $1,000 emergency fund goal until you reach it.  

If you used Ally it’s really simple as they highly encourage you to “Turbocharge your savings with Boosters that can help you grow your money faster.”  

Turbocharge Your Savings with Boosters

  • Reoccurring Transfers.  This is Automate just with a different description.
  • Surprise Savings.  They analyze all the checking accounts you add for them to track, and transfer money when it could work harder in your savings.
  • Rocket Fuel.  OK this one I added but it’s when you sell your stuff, work extra hours, get a $25 birthday check from Grandpa and Grandma

I’m excited for you to reach your $1,000 emergency fund goal.  Seriously I’m over here pounding on my desk and shouting you can do it!!!  I’m this weird combination of personal finance nerd and sports enthusiast, it’s just who I am.

Bottom line 

Saving $1,000 for an emergency fund is a big deal and it might be a little scary at first.  Just like monsters underneath your bed don’t let saving money intimidate you or get you to overthink the process.  I know you can do it.  

Remember personal finance is personal.  Don’t compare your emergency fund savings journey to anyone else.  Your financial journey, your financial plan.

Getting started is the most important thing, next is to keep moving forward towards your goal.  So don’t worry If you can only save $10 or $20 per month to start, it’s more important that you continue. 

Getting to an $1,000 emergency fund is a HUGE accomplishment.  Use the five (5) steps that I laid out and you will reach your goal in no time at all. 

Save $1,000 Emergency Fund Even Steven Money Coach

Need 1 on 1 help starting your emergency fund?

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Once you schedule, you’ll get an email with some questions to fill out about your current money and finances. On the call you can ask questions about coaching and talk about how I might be able to help you with your specific situation.  No pressure to join!

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