The Fool-Proof Emergency Fund

Most financial advisers recommend that you keep 3 to 6 months of expenses saved up in an emergency fund. You know that, but every time you try to save, the money tempts you and you spend it. Here is a fool-proof way to build an emergency fund that you can’t use for anything except for bills.

1. Make a list of your recurring monthly bills.

2. Gather those bills and find the highest amount you paid over the last year.

3. Write that amount next to the bill on your list.

4. Add 5 or 10 dollars to the amounts you wrote down.

5. Sign up for automatic bill pay through your bank.

6. Set all of your bills to be paid automatically at the higher amount on your list. Schedule the payments when you get paid, not when they are due. Five days after you get paid, all of your bills should be taken care of. Whatever is left is for miscellaneous expenses.

Over the course of a year, the extra 5 or 10 dollars you pay for your utilities and smaller bills will add up to an extra payment or two. Then, if you have a financial crisis, you can simply not pay those bills for a month and use the extra money to pay your unexpected expense – without being late on your bills and possibly affecting your credit rating.

If you want to establish a regular savings account, get one at an online bank or at a credit union that you don’t normally use, and then don’t get an ATM card for that account. You can transfer money into it each month when you pay your normal bills. Even if you start with 10 or 20 dollars a month, it’s automatic and adds up quickly.

Last 5 posts by Katryna Starks


  1. Tracy says:

    Really good tips Katryna! Thanks! My main problem though is NOT being able to even get to the point of 3-6 months worth of savings. Times are so hard for so many people out here today, that it is a paycheck to paycheck scramble for many of us. These tips however CAN be useful in the “how to” department when it comes to what little bit of money we may still have or are looking forward to having next month.

  2. Katryna says:

    You’re exactly right, Tracy! I haven’t been able to establish 3-6 months of savings, either. But, one day it occurred to me that the 3-6 months of savings was for the purpose of paying expenses in hard times, so if I could prepay those expenses by adding an extra $5 or so every month, it’s essentially the same thing – just a lot slower. The great thing is, this works for other emergencies, too. For instance, after doing this for about a year, I had an unexpected car repair. Fortunately, several of my small monthly bills had “$10 credit – do not pay” on them because I had built up so much prepayment. I didn’t pay my bills that month and paid to get my car fixed instead, then went back to paying my bills the next month – but I wasn’t late on anything and I didn’t get any late fees or creditor drama. Companies know that people are paycheck-to-paycheck and they use late fees to take advantage of our momentary lapses. This is a way to get the advantage back by trickling in a small buffer that keeps those fees away.

    • Tracy says:

      Thanks again Katrina for those wonderful tips! I’m sure if I and others pay attention to them, we’ll see a light at the end of the tunnel.

  3. LDJ says:

    This system really works. I included my savings as a monthly bill and I had enough to put a sizable down payment on automobile when mine died.

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