How to Start an Emergency Fund When You’re Living Paycheque to Paycheque

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When you’re living paycheque to paycheque and every dollar counts, it’s hard to imagine how to save any significant amount of money. The good news is, you can build up an emergency fund even while living paycheque to paycheque. The best news of all is once you’ve built up some savings everything else will get a bit easier as well. An emergency expense won’t “break the bank” and you won’t have to worry about making the rent or being late on bills.

How can I start a savings account if I have no money left over shortly after I’m paid?

You’ll find financial advice that says, “Pay yourself first before you pay anything else.” It may seem almost impossible, but this is the only way you can get started to build up an emergency fund.

Before you’re paid the next time, decide ahead of time how much money you’ll pay yourself and immediately put it into your new emergency savings account. It doesn’t have to be a large sum of money. You can start with as little as $5 to $10. Consider this “first money in.”

Should I consider making a budget?

Yes! A budget is essential. All people who are financially savvy have budgets. There are countless apps that will help you budget and manage your money down to the last penny. We like “You Need a Budget”. Even if you’re not the “budget type,” you can use broad categories of spending within financial apps that allow you some leeway.

Budget apps (and the old-fashioned pencil-and-paper method) will show you where your money goes. They’ll allow you to set budget goals and help you to adjust when you encounter unexpected expenses. If you’re under budget in one category during the month, take the extra money and … you guessed correctly … put it in your emergency savings fund.

Look for money-saving opportunities at all times.

You may have heard that rich people can be thrifty. You don’t have to become a Scrooge, but it helps to develop a money-saving approach to all of your financial dealings.

Once you’ve got your budget down (and have been honest about it), you can identify areas where you can cut back. You may cut down on grocery spending, entertainment, clothing, transportation, and more. We know it can seem depressing and un-fun to give up things you enjoy but it’s more fun than being unable to pay for an emergency expense. One of the most common areas for budget economy is eating out. We’re not talking about $150 meals, we mean things like vending machine purchases for soft drinks or water. Two dollars a day during the work week equals ten dollars. That’s $40 a month. In a year’s time, putting that money into emergency savings will be $480 and more with interest.

Small savings won’t make you a millionaire but being mindful with your money while you build up that emergency fund can give you a cushion for the future. Even a few hundred dollars in the bank can reduce your anxiety and stress – and that can help you make better financial choices.

Stretching Your Dollar More

Big-ticket budget items for most Canadians include housing, car payments, insurance, and utilities. You can shop around for better rates on auto, home or renter’s insurance. Look for bank accounts that offer the best terms and greatest benefits for your financial situation. If your emergency savings fund gets to about the equivalent of one month’s salary, you may find you will qualify for banking services with reduced or no fees. You may even qualify for a credit card with rewards or cash back benefits.

The tighter your budget, the harder it is to build that emergency fund. But that also means that small changes can have a lasting impact. It’s unrealistic, challenging, and also unhealthy to be over-aggressive in your spending cut backs and savings. Look for a few opportunities to save here and there, or to extend your dollar further, and use those as often as you can. With a set budget plan, a mindful approach to your spending, and a little bit of self discipline you can find meaningful results without entirely depriving yourself of life’s smaller pleasures.

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Savings

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