Some of the links below are affiliate links. If you choose to make a purchase we may earn a small commission at no additional cost to you.
8 Tips to Rebuild Your Emergency Fund After SHTF
So you did the smart thing, built an emergency fund and you were actually forced to use it.
Thankfully you and your family are safe and can start to get back to normal.
But what’s the best way to rebuild that fund and ensure you remain prepared for financial emergencies or full-blown natural disasters?
Here are 8 tips from those that have done it before:
1) Start with a Concrete Plan
Goals rarely materialize if you don’t put pen to paper (or finger to screen). Before you can effectively rebuild your emergency fund you need to decide exactly how much you need and when you’d like to have it by. Then you can plan other steps around it.
Now that you’ve lived through an emergency or disaster you might have a better idea of how much the fund should really be. Perhaps you’re just topping it up and want to get back to the original amount, but in some unfortunate cases you may be working from a deficit and decide it’s wise to put away much more this time around.
You’ll need to take in to account your family size, their health (are they likely to medication or extra support), the bare minimum necessities and how long you want to be able to live off them, emergency travel costs, and repairs to property or the daunting task of starting again.
There really is no fund too big and you can never be over-prepared, but a solid plan will help it become a reality.
2) Cover Immediate Expenses First
Of course, if an emergency has already hit you need to make sure you cover all of your immediate expenses and debts first before rebuilding your fund. If you’ve just dipped into the pot, you’ll have a much easier time.
You should begin rebuilding your fund once you are stable week to week or month to month, there’s no point making it an uphill battle.
3) Cut Monthly Expenses to Make Savings
There’s only one way to consistently put money aside and that’s to reduce your monthly expenses. This means doing a budget, listing everything you typically spend and trimming the fat where you can.
If this means giving up a few luxuries such as brand name food, the sports channels on your cable package, or meals out, so be it – it only has to be temporary until you’ve rebuilt that fund.
Once you have your list and removed what you can – stick to it!
To remove temptation and a feeling of guilt if you can’t stick to the budget, always set aside a small amount for fun and impulse buys.
4) Take on Extra Work
If you’re finding it difficult to put money aside despite a budget, or the fund isn’t being rebuilt as fast as you’d hoped, it might be time to find some extra work. This could be as simple as working overtime or asking for some extra hours, but it might also mean taking on a second job, freelancing online, doing odd jobs and handyman work, or selling your unneeded possessions.
Again, this only has to be temporary until your emergency fund is rebuilt, unless you end up enjoying the work and wouldn’t mind some added disposable income.
5) Use the Pay Yourself First Method
The ‘pay yourself first’ method is a simple but effective psychological trick that helps you save money consistently. All it requires is for you to treat your savings amount as an important expense. You might even name it something else in your budget to reflect this.
Each month right alongside your rent and utility bills will be this other expense, that you will treat the same.
In effect you’re paying yourself first, making sure the savings are made, before moving on to less important expenses.
The best way to make this work is for the savings amount to be the same every month or at least a percentage of pay. You might even set up an automatic payment into a savings account as if it was one of your bills coming out.
6) Set Milestones and Reassess
So you don’t get off track it is important to set milestones for your emergency fund, such as a quarter of the way, halfway etc. At each milestone, it is wise to reassess your situation and see whether you have the room to save more every week/month or even if you need to pull back a little.
Breaking the process up into chunks makes the end goal seem more manageable.
Once you reach your ultimate goal, you may even decide to make the fund bigger and continue saving.
7) Use Credit to Avoid Spending Your Fund
Once you start dipping into your fund it can be extremely difficult to get back on track. In fact, if you find yourself strapped for cash one month, we advise you to treat the situation as if the fund doesn’t even exist.
You can do this by using a credit card or taking out a personal loan online – of course only do this if you can easily cover the debt when you get your next paycheck. As with step 5, the trick is to make the fund a priority, as if it’s rent or an important bill.
8) Make Sure It’s Accessible
For an emergency fund to be fit for purpose it obviously needs to be accessible in an emergency – especially the most serious kind.
Think about it; in a major flood, hurricane or earthquake will you even be able to get to the bank? Will you have electricity and will your smart devices be charged with internet access? Even if you have online access to your money, will those around you accept digital payment?
It’s always a good idea to keep a percentage of funds in cash, in case that’s all you can use in certain situations. It’s also worth keeping some extra necessities like food, which could be used to barter with.
Whether you’re facing an unexpected financial emergency or have just overcome the horrors of a hurricane, flood or another natural disaster; employing the above tips can help you get back on track and more importantly, back to being prepared.
Hopefully, if your fund is big enough and you know what to expect, the impact of such emergencies will be minimal!
If you found the information valuable, feel free to share it with friends and family. Or if you have some emergency fund tips of your own, let us know in the comments below.