How to Build an Emergency fund

Save a part of your income and begin now, for the man with a surplus controls circumstances and the man without a surplus is controlled by circumstances.
- Henry Buckley

Every financial blog I have ever read repeats the same slice of information: "You should have 6 months of expenses in an emergency fund". 

I now that 6 months worth of expenses varies for each individual, but the number I arrived at is $15,600. That is a lot of money for a family like mine to try and sock away. I can think of a billion excuses as to why I cannot save money. Below are the top 5 reasons I not only have used but I hear from family and friends:

1.  Poor job market
2. We are barely making it as it is (did you see #1?)
3. Everything is soo expensive, where can I cut my budget?
4. Budgeting is hard and takes time
5. It will take forever to meet my goal

The fact of the matter is we can think of excuses not to save money, but the the truth is we all really need to! My favorite classes in both high school and college were economics (I know, I am a strange one). I sat down one day and thought, economics applies to more than just big economies, it applies to households as well. On a personal level, it can apply to my household. 

Sure the job market is bad, but there are jobs out there. They may not be the jobs we dreamed of when we were in school, true, but a household needs an income in order to be self sufficient. So, in today's job market you may be a little (perhaps a lot) disappointed at first, but as my grandfather always says "nothing lasts forever". I know my husband and I have had our share of disappointments in this area and I can say with absolute surety we are not the only ones!

With the poor economy covered, we are now at #2. Supporting a family is tough! The bills roll in on a monthly basis and without a care as to how many hours you worked or how many unpaid holidays fell in between that time period. You still need to buy groceries and you need to keep the lights on. While you cannot control the prices of gas or groceries, you can shop around. It's amazing how much you can save when you switch to store brands and eat in rather than grabbing lunch or dinner on the go. The basic rule of thumb is, you need to pay yourself first. Distinguish between wants and needs. This is hard too, believe me. We all feel that we work hard for a living and "deserve" certain things, right? While that may be true to an extent focusing on building wealth rather than just getting by should be a top priority. Try practicing the 72 hour rule. When you see something you think you would like to purchase, hold off for 72 hours. During this time period you can decide if you really need it and possibly even shop around a little to see if you can get it for a cheaper price. I think that is the key here, shopping around and distinguishing wants from needs.

Tracking your expenses also gives you great insight as to where your money is going every month and will cover # 3 on the short list. Yes, I will say it, you absolutely need a budget! We are fortunate to live in an age of convenience, so with that being said have you checked Mint? It's an online budgeting tool, it only takes a few minutes to set up and the best part is it's free! You can even download the app to your smartphone and access it anywhere. It auto tracks your savings accounts, retirement accounts, loan balances and credit cards to show you exactly where you stand financially at a swipe of your finger. I found it to be very eye opening and have been using the app for nearly a year now. It's helped me to figure out where we were spending our money and how I could shift those trends to increase my savings. This also helps to to address #4 on my list. Mint makes budgeting easy, because it can see every transaction and places it within my pre set budgets. 

#5 is the biggest opponent to starting to save for a nest egg. It is mentally draining and very discouraging in the long run. With the poor economy affecting not only the job market but also interest rates only adds to the dismal situation. That 1% savings account doesn't seem like it will help much in the long term, right? Well, here is another reason you need to shop around. There is also a possibility that you will need to have more than one account. The other thing to consider is auto payments. Saving for an emergency fund is so much easier when you treat it like a monthly expense (remember I mentioned paying yourself first?). So here is what I have done:

1. I opened a savings account with my local branch. This account is connected to my checking and will be readily available if I need it. The interest rate is only 0.75%, which isn't that great. I put $25/week in this account so it is slowly growing. It is important to have access to liquid money in case you need it, but I generally try to forget about this money and pretend it is not there for use. 
2. I also opened a certificate of deposit or CD with USAA. I know that USAA is only available to military members and there families but most banks offer similar programs. What I loved about this CD through USAA , is the initial deposit was $250 and I could increase the amount with monthly deposits. This is a 6 month CD and I contribute $25/week here as well. The interest is the same for the savings account, but the difference is I cannot touch this money until the 6 month period is up. That makes this more of a forced savings if I dip into my other savings account. 

Now all of this is outside of retirement savings etc. I will discuss those in a later post. This is essentially my personal experience attempting to build a 6 month emergency fund. I know you can probably find these tips all over the internet, but I find information more useful when it has a personal experience behind it. Happy savings everyone!