Baby Step 1 is to save $1,000 for a starter emergency fund. This savings cushion helps you cover small unexpected expenses without relying on credit cards or loans.
Steps
- Review your budget and decide how much you can put toward your starter emergency fund this month and combine that along with any savings you currently have.
- Reduce or pause nonessential spending to free up more money for savings.
- Look for ways to increase your income, such as selling unused items or taking on extra work.
- Add the money you save to your Emergency Fund budget item (How to Use Funds).
- Repeat each month until your Emergency Fund reaches $1,000.
Additional Information
A starter emergency fund is your first layer of protection when an unexpected expense, such as a car repair, appliance repair or medical bill, comes up. It helps you stay in control of your budget and avoid taking on new debt.
Your $1,000 starter emergency fund is not your fully funded emergency fund. You’ll build a larger emergency fund in Baby Step 3.
Focus on reaching this goal quickly, within a month if possible! The goal is progress and momentum, not perfection.
Use your starter emergency fund for true unexpected expenses, not routine monthly expenses or planned purchases.
Next Steps
Once you reach $1,000, celebrate your progress and move on to Baby Step 2: paying off non-mortgage debt using the debt snowball method. Open EveryDollar to review your debt items in your Debt group and continue building momentum. For more on tracking and payoff debt: How to Track Debts