If You Wouldn’t Drive Without a Seatbelt, Don’t Go Without One of These

Money in a jar sticks out of a purse.
Carmen Mandato/ The Penny Hoarder

Remember your first paycheck?

After spending all those hours foaming milk for lattes or ringing up disaffected customers’ overpriced T-shirts, it probably felt incredible to see those little black numbers. They represented your work paying off in real, live money.

And if you were anything like me, you couldn’t wait to cash that check… and blow your hard-earned green on something dumb.

Yes, You Need an Emergency Fund

Unlike most of our 16-year-old, first-job selves, adults are usually saddled with responsibilities like rent, groceries, cable bills and other fun expenses that make frittering away an entire paycheck pretty much impossible.

But the money you have left over after all the bills are paid? Yeah, you can still spend it all on new shoes and video games if you choose.

However, prudent Penny Hoarders know the importance of preparing for a rainy day. And it means setting aside some cash to keep on hand — just in case.

Which involves having money and not spending it.

I know, it’s hard. It’s really hard.

But it’s really important, too. Without an emergency fund, you have no backup plan if you run into an unexpected car repair bill, lose your job or worse.

And should you find yourself in such an unfortunate circumstance, chances are you’d whip out the plastic — and end up paying interest.

Talk about going from bad to worse.

So we’re here to make this process as painless as possible. Without further ado, here’s our ultimate guide to starting your very own emergency fund.

Where’s the Money?

First things first, figure out where your money is.

If you don’t have a budget, you don’t have total control of your money.

To save for an emergency fund — or anything else — you need to know how much money you have at your disposal to save.

We’ve got tons of resources if you’re a budgeting newbie — check out this post on how to make  an effective budget in seven simple steps, or this one on how to set financial goals (hint: Building an emergency fund is a great one!).

How Big Should Your Emergency Fund Be?

Another great reason it’s so important to make a budget: You’ll learn your monthly cost of living, which is how you’ll determine exactly how much you need to sock away.

Many experts suggest building an emergency fund of six months’ worth of living expenses including all the essentials: rent, groceries, gas and bills. That way, you’ll be covered if disaster strikes, and you won’t have to worry about figuring out how to get your next meal.

To keep your total emergency savings goal as low as possible, you can leave out any regular, but discretionary, extras, like your monthly bar tab or Netflix bill. You’re already looking at a pretty formidable challenge, and you probably won’t be too worried about binging House of Cards in a real emergency.

Psst — why aren’t you getting Neflix for free already, anyway?

But considering the average American has trouble saving up even $400, your total monthly cost of living times six might still seem like a completely insurmountable number — even with all the fun stuff snipped off.

For example, in my case, six months’ of expenses comes out to about $10,000 — and I live fairly cheaply.

But don’t make a big number into an excuse to just not even try in the first place: Any cushion, even if it’s just $1,000, is better than no cushion at all.

Make an initial goal based on your own expenses — maybe one month of living expenses or another achievable (but substantial) amount.

You can also play with this calculator, which helps you determine how much to save and factors in how difficult it would be for you to find another job in your field.

Where to Keep Your Emergency Fund

Now that you know how substantial a chunk of change you’re talking about, it’s time to figure out where and how you’ll store it.

This is tricky, because you need your emergency fund to be immediately available in case you need it.

That’s what makes it so hard to save up: When you know the cash is right there for the taking, it’s easy for it to burn a hole in your pocket.

I can’t imagine having $10,000 just floating in my savings account. It’d be darn near impossible not to spend it all on airplane tickets.

Even if you’re resistant to temptation, it’s regrettable you’re unable to put that substantial chunk of change into a long-term account. If you could, that money would multiply with the magic of compound interest… but unfortunately, most high-return accounts require you to make your money inaccessible for a set period of time.

Open a savings account you won’t regularly check, and use that to store your emergency fund.

Maybe you could even take advantage of an account bonus at a different bank than you usually use. That way, your emergency fund will still earn interest — but it won’t be in your face every time you check your regular checking account.

Although most regular saving accounts have a very small rate of return, they’re still a better option than stashing your whole emergency fund under the mattress. Some interest is better than none!

Besides, eventually you’ll have enough saved up that having that amount in cash will become unwieldy. Right?

How to Save Your Money

Here comes the tricky part.

Just having a nebulous goal to build an emergency fund probably won’t work. It’s too easy to “forget” about, especially when you’re eyeing a sweet new pair of boots or considering a Sunday brunch at that chic new bistro.

Once you have an emergency fund goal in mind, figure out how much of each paycheck you’ll need to set aside to reach it in three months, six months, a year.

Then direct that amount to your emergency account — either by direct-depositing it directly from your paycheck, or via automatic transfer from your checking account after each payday.

Even small contributions can really add up: If you can set aside just $25 per week, you’ll have $600 in six months.

That said, you probably want to be more aggressive about this particular goal. Disasters always happen when you least expect them. By cutting back now, you’ll allow yourself more freedom and peace of mind in the future.

You’ll probably have to make some budget cuts. After all, there’s a reason you don’t have an emergency fund yet.

Easy places to start? Cable, clothes and alcohol.

Commit to your plan and track your progress to keep yourself accountable. Make a spreadsheet or use a digital app like Mint to watch your emergency fund grow. Seeing the number get bigger will make it totally worth skipping your daily Dunkin Donuts run.

Trick Yourself Into Saving

If you know the disciplined strategy won’t work for you — or just to supplement your awesome savings skills — do what you can to find easy, painless ways to sock away money you won’t miss.

For example, writer Susan Shain was able to finally start an emergency fund by using Digit, an automated savings app that rounds up your spare change and deposits it into a savings account. She discovered those pennies really do add up… and you don’t even miss them!

However, you won’t earn any interest at all on money you save with Digit — those returns are actually how the app makers get paid — so consider whether you’d rather have interest or convenience.

Another great trick to try? Sock away extra cash into a wine bottle. Since you have to break the bottle to get it out, it’s pretty hard to decide to spend it on a new jacket.

This method worked really well for me recently: Since I don’t carry cash, I stuffed every bill I came across down the throat of an empty bottle of grenache. At the end of six months, I had almost $500!

I used that cash to fund, almost in its entirety, a four-day vacation… but it would have been a great bolster for my emergency fund.

Hey, no one’s perfect.

Finally, and Most Importantly: DON’T TOUCH IT

Now that your emergency fund is in place, don’t make yourself go through the whole hullabaloo again by blowing it.

I promise you, you’ll thank me later.

Congratulations! You just took a gigantic step toward getting financially fit.

Having an emergency fund can save your behind if you lose your job or get too sick to work — and it can also free you up to change your career, start your freelance business or pick up and move.

Nothing’s better than finding financial freedom and getting out of the paycheck-to-paycheck rut… not even cable.

Jamie Cattanach is a freelance writer whose creative writing has been featured in DMQ Review, Sweet: A Literary Confection and elsewhere.