5 steps to create your emergency fund

emergencu fund

If you too are concerned about your ability to pay unexpectedly big bills and want to start creating your own emergency debt buffer, follow these five simple steps that will work no matter your income or budget.

1. Calculate your magic number

Before you begin , you need to know how much money you are aiming to save and how long it will take you to do so. Having a precise figure in mind will help you stay motivated even when times are tough and will give you a strong sense of accomplishment once your challenge is completed. Most experts agree that your emergency fund balance should be able to cover expenses for one to six full months, including rent, utility bills, and miscellaneous expenses.

Go through the last six months of your bank account and calculate how much you spend per month and then set a fixed number as your savings goal: then pin down how much you can afford to save per month. This will also help you extrapolate the amount of time you need to save.


Italians are people who are on average worried about their future and who, consequently, try to save. Nothing like having a contingency fund can help banish negative thoughts !



2. Be inflexible and ruthless with your budget

This goes for the first step : As you calculate how much you can afford to save each month, you should also sift through your spending budget to figure out where you can save.

If you are already working on a tight budget you won’t be able to do this, but by saving in the categories where you spend the most and moving these figures to your emergency fund, you may find that you are able to reach your goal in much less time.

3. Automate your savings

You may have tried in the past to set aside money every month but sometimes you have forgotten to do so, other times you have been caught off guard by higher-than-expected bills. By automating your savings and setting aside a certain amount each month or week in a separate account, you are achieving two things.

First, you are putting money aside , which is your primary goal. In addition, you are treating your savings as if they were “fixed costs” in your budget, which cannot be changed or ignored. In this way you are also concretely changing your mental attitude towards saving, making it a habit.

4. Put everything out of your reach

Once you’ve decided on your goal and set your automated weekly savings figure, make sure you put this money out of your reach. In fact, you shouldn’t leave them in your main current account, as you could fall into the temptation to spend them.

On the contrary , they should be in a different savings account that you have dedicated only to this goal. If you put them in a general savings account along with money for other purposes (such as for holidays or a wedding fund), you would run the risk of tapping into that account too often and spending it on something else.


5. Do the math with the installments

There are several schools of thought regarding how best to find a balance between paying off debt and saving. Some suggest paying off your debts before you start saving, while others recommend doing both things hand in hand.

What is most important to you is that, by the time you create your emergency fund, you have control over your debt and are able to pay it off without claiming victims for ever-increasing interest payments. Also, try not to fall back into a form of monthly debt, just to find money to put into the emergency fund. Any money you put into it should come from your income and shouldn’t push you to exceed it in any way.

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