More than one-third of American households dealt with a major unexpected expense in the past year, according to a 2018 survey by Bankrate. Financial experts stress the need for building a robust emergency fund for such times. But what happens when you’ve drained those savings?
Rebuilding your emergency fund may not feel the same as it did the first time. While you may be glad that you had the reserves to cover an unexpected expense, you may feel shaken by the prospect of it happening again before you can recover.
To help, we’ve put together six ways to replenish your emergency fund and protect yourself from future rainy days.
1. Cut out all unnecessary expenses
Maddy Osman, an SEO content strategist, had a couple of thousand dollars saved when she moved out of her parents’ house and signed a lease on an apartment. But shortly after she moved in, she lost her job. By the time she found a new one, she had drained most of her emergency fund.
“It took much longer than it did to initially build it back up since I was now responsible for all of my bills, without my parents to lean on,” she said. That said, she saved more than $10,000 after three or four years and had her frugal attitude to thank for it.
“As soon as I was fired from my job, I identified nonessential expenses [such as shopping and going out to eat] that I could cut until I was earning money again,” said Osman. “But I kept the same frugal mindset well into my new job, telling myself that it was better to save money than spend money.”
Cutting back is a great idea anytime you want to save more cash or pay down debt. But it’s also important to leave yourself some fun money. Otherwise, you could get burned out on your Spartan lifestyle and overcompensate by going on a spending binge.
Find the right balance for yourself between the urgency of your savings goal and enjoying your life.
2. Use windfalls
If it’s nowhere near tax season, however, other windfalls such as quarterly or annual bonuses or large payments for overtime can help you get your safety net back to where you want it to be.
3. Pause other financial goals
If you no longer have a financial cushion between you and the next emergency, you could end up with high-interest credit card debt or missed payments on your monthly obligations.
So if you’re saving for other financial goals, such as your next vacation, a home improvement project, or another short-term goal, funnel all that extra cash toward your emergency fund.
Once you’ve reached a level where you feel like you can weather another emergency, you can go back to your regular savings pattern.
4. Look for ways to earn extra cash
Athena Lent, a blogger at Money Smart Latina, was working on building her emergency fund when her cat was diagnosed with feline immunodeficiency virus. “I had around $1,300 saved at the time, and I was working on saving $3,000 for the year,” she said.
Her cat, Harrison, spent three days in a hospital and needed expensive medications. “A lot of people saw this as excessive, but I consider my cat family,” she said. “I’m happy I did it because he is still doing great.”
To rebuild her emergency fund, Lent started doing work as a virtual assistant managing social media accounts for a nonprofit organization. The gig helped her replenish her emergency fund within a few months. But things got difficult again when Lent found out she had osteoarthritis in her spine. The pain made it difficult to work, let alone walk.
“I took a second look at my budget and cut out anything I could do without,” she said. She also negotiated raises with some of her clients from her virtual assistant business, giving her more room to add to her safety net.
5. Sell some of your belongings
Unless you’re a staunch minimalist, you likely have some stuff sitting around your house or apartment that you no longer need. By being proactive and getting rid of stuff you no longer use, you could avoid having to do it in a hurry and potentially get less money on your sales.
Several websites and apps make it easy to sell your stuff online, including:
- Facebook Marketplace
Some services are free, while others charge a fee based on a percentage of your sale. When pricing your goods, keep these fees in mind, too.
6. Use a credit card balance transfer
When Janeil Pierre, a staff sergeant in the U.S. Army and blogger at Budget Every Cent, was stationed in Hawaii in 2015, she had $10,000 in her emergency fund. Shortly after she dipped into her savings to fix a leak in the roof of her home in Georgia, Hurricane Matthew destroyed the same roof. Then after she replaced it, she moved out of the barracks where she was stationed and moved into an apartment.
After all that, Pierre had only $100 left in her emergency fund and was panicking. “I was making enough money to rebuild my emergency fund, but it would have taken me too long,” she said. So instead of building her savings gradually, she used a credit card that had a balance transfer promotion with a convenience check.
“It was a 2% balance transfer fee with 0% interest for 15 months,” she said. “I had the cash deposited into my checking account first, and then I transferred it into my savings account.”
Pierre knew she could afford to pay off the transfer within the 15-month period, and the fee was worth the peace of mind she had.
While this isn’t an option we’d recommend to most people, it may be worth considering if you have access to such a promotion, you have the income to pay it off interest-free, and you believe that having all the cash in savings at once is worth paying a balance transfer fee.
Don’t let discouragement dampen your motivation
It can be disheartening to deplete your emergency fund, especially if you’ve spent months or even years to build it up. And the idea of spending that long to get it back to where it needs to be can feel like an insurmountable task.
If you’re feeling this way, take a step back and congratulate yourself on the fact that you were prepared in the first place. Then start doing some of the same things you did the first time you built up your savings, as well as some of the ideas we’ve shared here.
It will take time, but these tips can help you get there faster.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|