How to Ensure You Have Enough in Your Emergency Fund

Unexpected financial emergencies happen to all independent workers in the gig economy. A dedicated emergency fund can cover unplanned expenses, such as medical bills, home repairs, or lost gigs. Having money set aside can give you peace of mind. It prevents you from needing to dip into your daily living expense budget, take out a loan or borrow from your retirement fund. But how much should you save? Use the following tips to ensure you save enough money in your emergency fund.

Determine the Ideal Size of Your Emergency Fund

To ensure you’re prepared for an emergency, know how much to save. In general, experts recommend saving enough to cover three to six months of living expenses. This includes rent and bills, as well as normal food and travel expenses. The amount you save depends on your needs and budget.

Consider increasing your savings goal to cover your high-risk career in the gig economy. This way, you can successfully navigate gigs fluctuations, income changes or lengthy unemployment.

Make a Budget to Reach Your Goal

Before you add your emergency fund to your savings plan, make a budget. Then, cover all your essential daily living expenses as you save for emergencies.

Start your calculations by listing your monthly daily living expenses. Factor in housing, utilities, food, transportation, personal expenses, health insurance, and debt repayment. Keep in mind that you could decrease or cut non-essential expenses, such as takeout, entertainment and vacations.

Next, think about the costs of potential emergencies. For example, what would it cost you if you lose a major gig, break your arm or need a new roof? Use these figures to help you calculate your savings goal.

Now decide how much you want to save each month. Then plan to meet this goal. Also, plan to adjust your savings as needed. You can always save more if you have extra funds or receive unexpected money from a side job or tax return. Or temporarily reduce savings during slow seasons.

Finally, start now. Even if you can’t meet your ideal savings goal right away, every little bit helps. So begin your emergency fund even if you can’t yet save the ideal amount.

Don’t Spend Money Meant for Emergencies

Your emergency fund is for emergencies. Period. While you want your emergency fund to be accessible, don’t make excuses to spend it.

To protect your emergency fund, try one of these strategies.

1. Set guidelines for using your emergency fund. Only touch your fund for the expenses you predetermine are emergencies. For example, an emergency could be an unexpected medical bill but not routine car maintenance.
2. Save automatically. Arrange regular transfers from your main bank account into your designated emergency fund.
3. Open an account at a bank or credit union across town. Make it more difficult to access your emergency fund for daily expenses.
4. Load a prepaid card that isn’t connected to a local financial institution. Spend only the amount of money that’s loaded onto the card.
5. Freeze your debit card. You reduce the possibility of using your card spontaneously when you ask the bank or credit union to freeze it until you need it.

Your emergency fund offers a layer of protection, so ensure you save enough for your future.

About the Author: Jennifer Turner writes web content for a variety of clients. As a gig worker, she understands the benefits and challenges of the industry, which is why she prioritizes daily self-care. Find her at WriterAccess.