Saving our baby emergency fund when we first started Financial Peace University seemed impossible. In this post, I’ll share with you the ways we were able to save ours in only a month.
How We Saved a $1000 Baby Emergency Fund in Under One Month
How could we ever pay off our debt, save for the kids’ college and for retirement, and pay our mortgage if we couldn’t even come up with the $1000 Dave Ramsey suggested for our baby emergency fund?
It didn’t seem possible!
Briefly, I tried to fool myself into thinking that $500, the amount Dave says is okay for someone making less that $20,000/year, would be enough. After all, we’d never had $500 whole dollars in our savings account before!
But my husband voiced reason when he said, “Think about if the water heater goes out. And then we had car trouble. We couldn’t cover that.”
I knew he was right, and I knew that we needed at least Dave’s recommended $1000 for our baby emergency fund. Maybe we could cover a water heater and a small car repair with $500 or less, but that wasn’t the point.
We needed to be able to cover several small or one bigger emergency (think major damage or breakdown) without having to charge on our credit cards to cover the expense.
We’d been there, done that. That’s why we needed to be in Financial Peace University in the first place.
And the hope that the course gave us that we could someday be debt-free and ‘live like no one else’ motivated us to follow the plan as written.
7 Things We Did to Save our Baby Emergency Fund
1. I created a budget spreadsheet for us in Microsoft Excel.
With a budget spreadsheet, we could track our income and expenses. I’d made paper and pen budgets before but usually on slips of paper here and there which ended up getting lost. I’ve since moved our budget spreadsheet to Google Sheets. It’s nice having everything online so we don’t lose anything.
2. We began using YNAB budgeting software.
You Need a Budget (YNAB) helped us get more detailed in our budget and set up electronic categories we could use as our cash ‘envelopes’. We also sync the budget to our phones so we can each see what is available in our categories. YNAB has made a huge difference for us and our spending and saving.
3. We budgeted a bare bones amount for groceries and put the extra in a dedicated envelope.
Part of our plan consisted of eating at home all month as well. No take-out food, no eating out. It’s not as easy as it sounds, at least not for us. But we did it!
Amount saved: $340 (Running Total: $340)
4. We had a no spend month for entertainment.
Typically, we budgeted $100 per month for a night out at the movies and a restaurant. When we felt generous with ourselves, we added another $100 in a category for concerts, shows, or sporting events. Our kids had no events that month which helped, so we took the $100 we would have spent going out and added it to the envelope.
Amount saved: $100 (Running Total: $440)
5. I put the money set aside for our sons’ haircuts into the envelope and used clippers to cut their hair.
Unfortunately, I stink at cutting hair so they pretty much had their heads shaved, but they were 13 and 11 at the time and weren’t too devastated (although it was a close call with the 13 year old).
Amount saved: $30 (Running Total: $470)
6. We sold stuff.
While I felt like we didn’t have much of value, it turned out we did have some things. Our DVDs and old video games sold the best. We also had a few pieces of furniture that sold.
The furniture and other odds and ends sold in a garage sale and the movies and games sold on eBay. I know many people use Craigslist to sell items, but I never have.
It can be hard to get rid of your stuff. We develop attachments to our things, don’t we? But there comes a time when ‘stuff’ just doesn’t make us happy any more. That’s where we had gotten, and being debt free sounded much better to us than having stuff.
Amount saved: $300 (Running Total: $785)
7. I called the medical clinic where I had been making payments and asked if I could skip a month.
Usually, I wouldn’t suggest skipping any payments, but the medical bill was interest free and I knew there wouldn’t be any penalties. I got shuffled around to multiple people but finally got my request approved.
Amount saved: $250 (Running Total: $1020)
We did it! Now, I know it’s not possible for everyone to meet these numbers. Your income and budget most likely looks very different.
While we saved our baby emergency fund with these seven steps, you may have to do a few things differently.
But look at the overall plan…
Can you sell stuff?
Do a no spend on entertainment month?
Only eat at home all month?
Renegotiate a bill?
Keeping Up the Momentum
We went so bare bones the month we saved our baby emergency fund that I wasn’t sure we could keep up the momentum and start paying off our debt.
Having $1000 extra dollars for our debt snowball every month wasn’t possible. Not then, at least.
We’d already sold what we felt we could. And I couldn’t see always living so bare bones.
But Dave says to be ‘gazelle intense’, and I knew that to follow the plan we would need to be that dedicated.
In Microsoft Excel, I created a debt snowball calculator so we could keep track of our debts, the order we were paying them, and how much we had to pay each month.
I knew we could just start the snowball with the minimum payments only, but when seeing on the calculator how long our debt free journey would be if we did that, we decided we had to continue finding ways to lower our spending and pack together a bigger snowball.
It became a game to try to throw more snow in a month than we had the previous month. Using my debt snowball calculator, we could ‘keep score’ and see if we could move up our debt free day a little closer.
Longer Term Ideas to Save Extra Money
I’ll write more about making extra income throughout the year in another post, but I wanted to mention it here, too, as it’s important to stay excited after the rush of saving your baby emergency fund.
The best way to have more money to save is to make more money to save. You can find a part time job outside of the house or you could find a work at home job.
Another way to save on monthly bills is to cut expenses. You can also sell stuff on eBay, Craigslist, or a garage sale.
Check back soon for more ways to earn and save extra money plus details on how to get started.