How to Build an Emergency Fund

Pixie Green
5 min readApr 11, 2022

Having an emergency fund is one of the first steps you need to take on the road to financial independence or even financial responsibility. Building one can be a long, frustrating process, and with inflation and the cost of some consumer goods on the rise, it’s harder than ever now to start.

Sadly, a Federal Reserve study in 2019 revealed that 40% of Americans don’t have more than $400 to cover an emergency. I find this insane because even when I was a broke college student, I had $2000 in my savings account. I don’t recall where I got that money. Maybe from working retail jobs. Maybe from saving birthday money for two decades. I don’t know, but I do know that most people reading this and probably most people you know have the means to save more than $400. But they’re just not.

If you’re frugal like I am, you may have noticed your friends sometimes spend more than you would spend or more than you think they can afford on things. We all know someone who goes to the bar and drinks all night, walking away with a three-figure tab.

GoFundMe has become a popular way to get money in a snap, simply because most people starting a campaign had insufficient emergency savings. I’m sure many of those people were embarrassed at the reality of asking friends and strangers for money. Not having an emergency fund can put you in many situations you don’t want. Here are the fundamental ways to build that fund.

Analyze necessary expenses

The first thing you need to do in order to build a sufficient emergency fund is to know how much you need each month. This should only cover your necessary expenses because if you have no income and need to use your emergency savings, you shouldn’t be going off and doing fun, expensive things anyway.

Necessary expenses are also typically your fixed expenses: things that cost the same every month. This includes your rent, HOA dues, child support payments, utilities, and insurance premiums. Once you know your necessary expenses and have the average you spend every month on these, you get an idea of how much you need per month of emergency funds.

Cut out all discretionary spending but one hobby

It doesn’t stop there. You’ll need to calculate variable expenses, too, especially the ones that won’t change if you’re unemployed like grocery and pet expenses. I don’t consider clothing and most hobbies when…

Pixie Green

I’m that one friend you have who you know you can count on to be blunt, honest, and give it to you straight. We’ll figure this shit out together.