10 Proven Tricks To Build Up Your Emergency Fund

Summary – The keyword is fluid & 6 months salary

If you read financial related blogs, almost every one of them will advise you the same thing – Start your emergency fund. Technically this fund will serve as a safety net should anything happen to you. You never know.

For example, you are sacked from your job. With your emergency fund, you will be able to support your family and still pay all those monthly bills while searching for other jobs. Imagine not having one, you car will be taken from you, maybe even your house. How on earth will you be able to focus on job hunting with all those problems?

So start your emergency fund, Recommended value should be around 6 – 9 months of your monthly expenditure. Let me repeat, “expenditure” not your salary.

These tips may help in establishing your emergency fund.

1) Eliminate bad habit that cost money

Bad habits that cost money are like smoking, drinking, partying every other night etc. Look into your daily activities and identify which unimportant activities is draining your money. List them down and decide right now whether that habit is good or bad. If it’s bad, put a stop to it.

How to get out of a bad habit? Aha.. That will require an entry of its own.

2) Pretend everything cost $5 extra

If you buy your monthly groceries, and it total up to $120, Take out $125 instead. Pay up for the groceries, but the remainder $5 is to be put into your emergency fund. Do this to every purchases you do. Call it your personal tax if you want.

You will spend less for sure, and you are saving more. What harm can it do?

3) Budget and rebudget

Now you should have cut all the unnecessary expenditure. Make a budget for the month. Here is how you can do that.

Record everything you bought and spent up to the cents. This is the time consuming part, just bear with it for about 3 months. You just want to have a clear picture of how you are spending your money.

Once you have recorded every expenditure of the day, write it down in your Excel file and tally it with your actual balance in hand. If it is tally, that means you are monitoring your finance well. If not, that can only mean that there are some money lost without you knowing it. Figure this out first.

By the end of the month, you should know how much exactly are you spending on food, entertainment, bills etc.

Assuming you are spending $2000 for the whole month. Take 10% out and that would be $200. Now check back your budget. Where can you squeeze out that $200.

Certainly things like phone bills, entertainment, electricity can be cut easily. Remember this is only temporary. Once you have achieved your emergency fund target, you can do what ever you want 🙂

4) Snowball saving

Remember the snowball technique? That technique was actually used for eliminating debt fast. However we can adjust the technique so that we can now save faster. Always pay the minimum amount of any bills and just put the extra money to your saving.

It would help to get yourself a piggy bank. When you cannot see your money, you will be more likely to forget about it. Rule of thumb – Never pick up the piggy bank to weight them. You will be tempted to count the money inside.

5) Create multiple bank accounts

I would suggest 3 accounts. One is for rainy days, another is for death or 911 cases and the third one is to be forgotten.

One of the advantages of keeping separate accounts is that you will always see the total amount saved as low. This will hinder any temptation to use it. Imagine you are saving about $80 per month in one account. Will you withdraw that money for your entertainment when you know how hard it is to save that amount of money.

6) Use online banking.

If you can, please use online banking. It is very easy to do and you can transfer all your money to another account without touching the money.

You see when we always have that feeling of a think wallet, we will know subconciously that we have a lot of money. Anything happened, however minor, we will straight away withdraw the money since we know it’s there.

7) Play “Kutu”

“Kutu” is the name of the game played here in Malaysia. It is pronounced as Koo Too. A group of 10 people will sit down and agree to pay $100 per month for 10 months. They will then set up a schedule on when to receive the money. For example, January is for Joe, February is for Tina.

When it is January, one person will collect $100 from everyone and surrender the money to Joe. The next month, they will collect all the money and surrender it to Tina. This will go on until all 10 people have received their share of money.

One thing that must be clear. All the 10 people must be very trustworthy. The system will be a mess if somebody start avoiding payment etc.

8] The Lost Key strategy

This is another favorite of mine. Surrender your ATM card to your spouse. But do not give her the pin number. This way, both of you cannot use the card to withdraw money. The money will be safe.

You just need to explain to your spouse that the reason you didn’t give her the pin number is due to safety reason. Not because you didn’t trust her. You don’t want this saving exercise to ruin your relationship now do you? 🙂

9) $1 doesn’t have any value

An item cost about $7, and you pay with $10 bill. Convince yourself that the $3 change (which is in $1 bill) have no value.

But of course do not throw away that $1 bill, just put it into your piggy bank. Believe me, you will achieve your target in no time.

10) Personal loan

This should be used only as your last resort. If you are having trouble committing to your saving habits. Apply for a personal loan with low interest and put all the money in your account as an emergency fund.

The advantages

  • Your emergency fund is ready
  • People will harass you daily if you didn’t pay
  • You can even make money if you choose carefully

The disadvantages

  • You are losing money from paying interest


Emergency fund is a must. If you don’t have one, start working on one. Just make sure it amounts to 6 months of your salary and the saving is fluid (You can take out the money anytime you want)

– I Wonder –
How do you save your money?

————- Personal Note ————-
The lost key strategy is a bit dangerous to be used. You may end up losing your card, or forgetting your pin number or worse both.

Luckily I still remember I have an account there.

Photo Credit – Striatic

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This post has 6 comments.

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  1. 18 Dec 08 12:31 am

    Hey Banji,

    That’s interesting. I’ve never heard of Kutu before. I’m not sure that I grasp exactly what the purpose of the game is though. When it is your turn to receive all of the money, wouldn’t you be tempted to go out and spend it?

  2. 05 Jan 09 5:17 pm

    SteveC – The purpose of the game is actually to help you get that amount of money. When you receive it at your turn, it will always up to you on how you are going to spend it.

    Just think of it like a compulsory bank payment without the suffering from the interest.

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  5. 26 Aug 10 10:03 am

    very good advice. A lot of people still don’t realize that by making small, simple changes in their habits, it will affect their financial status in the end.

    A word of advice regarding bulk purchases though. There are times where bulk purchases are not always cheaper, so price comparisons need to be done.

  6. 17 Sep 10 11:59 pm

    David – Thanks for the additional note. I agree, bulk purchase can sometimes be more expensive. I guess the rule of thumb should be “must always do your homework before any purchase”. With any luck, the long time taken for the homework to be finished will deter the purchase itself.

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