One of the keys to getting out of debt and building financial wealth is creating an emergency fund. This step is so important that it is the first baby step in Dave Ramsey’s Financial Peace University.
Although it is important to build this initial emergency fund quickly, that isn’t always financially viable for people who are deeply in debt. Here are some proven ways I have used to build that emergency fund.
This is a proven winner, as selling personal items has never been easier or more inexpensive. In the old days if you wanted to sell personal items you had to buy a classified ad in your local newspaper or have a garage sale. The first way was cost prohibitive to selling cheap stuff because you had to cover the cost of the ad. The second method was labor intensive and often resulted in hours of work for little profit. Now you can sell personal items inexpensively through Craigslist, Backpage, Ebay, Amazon and other outlets.
If you are looking for instant results go with furniture, kids/baby clothes, toys and collectibles. I’ve been very successful selling furniture as I have approached the same as if the item was given to me any my entire sale would be profit (the garage sale mentality). Say you bought a couch 10 years ago for $500. Over the 10 years you got $500 worth of time (sitting, sleeping, watching TV) out of the couch. The couch is now worth $0. So anyone who gives you anything more than $0 for the couch has created a profit for you.
On Craigslist you can list items by category free of charge. You can upload simple photos of the item from your computer by taking them on your phone and emailing them to yourself. You can copy descriptions of your items from the Walmart, Target or other websites.
I’ve also listed multiple items together but listed their prices separately, such as a China hutch for $85 and a small end table for $20. The total for the two items was $105. Within an hour I had a text offering me $90 for both. I immediately accepted. Since I was no longer using and no longer needed either item, they were worth $0 to me. To the buyer, the bartered price fell from $105 to $90. It was still $90 more than the items were worth to me.
Posting to Ebay and Amazon is almost as easy as Craigslist, though there are small fees involved in completing the transaction based on the final sales price. I have used Ebay to sell collectible items such as electric football games, rookie cards and logo golf bags in the past.
Another way to build that fund is through scheduled bank transfers. In my job I get a check every two weeks. Through my U.S. Bank online account I have set up two transfers that happen every Friday I get paid. Each one is for $20. One goes to my emergency fund. The other to my son’s savings account. Because the total amount is only $40 every two weeks I don’t miss the money in my checking account. The emergency fund and my son’s saving account grow without me even noticing. Over the course of one year (26 paychecks), you I am putting $520 in each account without hurting my lifestyle.
The Savings Envelope
This is one of my personal favorites as it is so easy to do. It’s a transfer between the cash in your pocket and an envelope which you keep hidden somewhere.
I’ve written before about the $5 a week saving plan. Pick one day a week and put a reminder on your phone or your calendar. On that day, take $5 and put it in an envelope. Now stash the envelope someplace out of site, but a place that you frequent so you will remember that it is there. My personal favorite hiding places are under a stack of clothes in a drawer, in a backpack or even in a non-clear vase. If you do this for one year that $5 each week (just one less Starbucks coffee a week) would add up to $260. If you want to speed up the process you can do $10 or $20 per week.
This is a great way to beef up your emergency fund or pay for Christmas gifts for the family and friends without it hurting your paycheck. Starting January 1 put your money in an envelope. Set your goal of $10 per week. On the 50th week of the year (about eight days before Christmas) you will have $500 in your Christmas fund. Now make yourself spend no more than that $500 on your entire Christmas, and Christmas will not have hurt your wallet at all.
Another saving envelope plan I read about recently is the 52 Week Money Challenge, which is contributing money based on the week of the year it is. On your first week of putting money in an envelope put in $1. On the second week put in $2. On the third week put in $3, etc., until the 52nd week of the year (one full year) when you contribute $52. If you did this every week for one year, your envelope would contain $1,378 at the end of the year. There is even great information available for doing the challenge backwards.
If you are not going to put that money into your emergency fund, 401K or some other type of savings plan it is an excellent way to fund a vacation.
The No Groceries/No Restaurant Challenge
If you are having trouble finding the money to trying any of these saving plans there are ways to cut corners and create more money. One challenge I am trying this money is the No Restaurant Challenge. I don’t designate much of my monthly budget to restaurants, bars or fast food. For September I am challenging myself to reduce this number to $0. I am trying to see if I can go an entire month without eating a single meal out or going out for a drink. If you spend $100 a month on eating out (which is actually a low sum for most people) and you go one month spending $0 you have just created $100 for your emergency fund. Not to mention you probably just extended your life but not eating all that overly-processed food.
For this week I am not going to buy any groceries. My son and I are only going to eat what we already have in the house. It means we are eating a few more canned and boxed foods. I have to plan ahead and thaw something from the freezer. I have to be a little more creative in my meals. But neither him or I are lacking for nourishment. We’ve been eating chicken breasts, rice, lot of canned vegetables and plenty of other good stuff.
The key is to see how much of your cupboard/pantry you can clean out before you absolutely have to go to the grocery store. If you are like most Americans, there’s a lot more food in there than you think. You need to be creative in your meal.
I haven’t been to grocery store in six days and won’t have to go again for another seven days when I need to buy milk for my growing boy.
Hopefully this will help you jump start your emergency fund.