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How To Start An Emergency Fund With A No Spend Challenge

We all need an emergency fund.  But when you are tight on money and don’t have a good money management plan in place, it is hard to figure out where that money for an emergency fund is supposed to come from.

One way to make it fun and get the job done at the same time is to try a no-spend challenge!!

How To Start An Emergency Fund With A No Spend Challenge

A no-spend challenge, spending freeze, or shopping freeze is a plan to halt all spending for a designated amount of time.  The rules are made up by you. These are your monkies, and this is your circus. Whatever you want to do.

The concept is to stop frivolous spending to meet a financial goal.  I did one for six months in January 2018 to pull back the reigns on my shopping.

It worked well. To this day, I think before I buy it. Do I need it? Do I have something that would or is working just fine?  

Can I wait to get some more mileage out of it before I replace it? I still ask these questions.

What Is An Emergency Fund?

Well…it is just that.  A fund you hold only for emergencies.  Something is always going to happen. The water heater will break, or the frigid Upstate NY temperatures will kill the car battery.  

You know – that battery you JUST bought for your son’s car ten months ago! Thank you negative 30 degrees!!!

It’s a rainy day fund for those unexpected things that just come up.  It is NOT those Frye boots that you just saw in your email or a dinner out because you are just too tired to cook one more meal for these children.  

Those are pretty great situations to spend money on, but they are NOT emergencies.

Your sister’s birthday is also not an emergency.  She was born two years before you on August 3 so her birthday is the same every single year.  It never changes. If you know it’s coming, it is not an emergency.

Emergencies will happen as sure as the rain will fall.  Think of an emergency fund as your umbrella! And remember Murphy’s Law: “Anything that can go wrong will go wrong”.  Be prepared.

Where do you keep your emergency fund?

Some people keep it in a safe in their house; some keep it in a separate savings account at a different bank.  I know people who opened up an online-only bank account and keep it there.

Some people keep it in a coffee can in the back of the cupboard or a container in the freezer marked “Fresh Squid” – that only works if nobody likes squid!

Wherever you do keep it, your emergency fund has to be just out of reach that you can’t grab it to go out for pizza and wings but not so far out of reach that you can’t get to it if you need it.

How Much Should You Have?

I think this answer really depends on the next question.

Do you have debt?

If the answer is no, then go ahead and set the amount to the standard three to six months of expenses.  Some people feel more comfortable with six to nine months.

Remember, these are only expenses. Things you will need to pay in order to have clothing, shelter, and transportation.  For example, rent or mortgage, food, transportation, insurance, heat and lights, phone, and maybe cable and internet.

All the things that you would NEED to pay if there were ever a loss of job or illness.

If the answer is yes, then my suggestion as a Financial Coach would be to set aside a much smaller amount, $1,000 to $2,000.  Just until you can get your debt cleared away.

Because, really, you should focus on that debt!  This small emergency fund is just so you don’t go into a tailspin if you need that car battery or hot water heater.

Regardless of whether you have debt or not, let’s start with saving $1000 for the no spend challenge.  You can continue on to save after that any way you wish.

If you are trying to pay off debt, you still need some sort of cushion for yourself.  It will do wonders for your motivation, stress relief, and overall state of mind to have that small emergency fund available.  

Make sure that is in place before you start attacking your debt. After the debt is all paid off, you can beef up that emergency fund to a full 3-9 months.

What If You Are Broke And Have No Emergency Fund?

Here is where the no spend challenge comes in!!  There needs to be some thought put into this. Let me preface this explanation by saying there is a difference between being poor and being broke.  Most Americans are not poor.

They have decent-paying jobs and do not struggle to feed their families or buy their children’s shoes.  They are just living above their means.

And it just needs to stop.  It needs to stop not only to save for an emergency fund, but also for your quality of life and financial wellness.

How long will you do this no-spend challenge for?

Will it be every Wednesday? Will it last a weekend, a month, six months, or a year?  If your plan is to fund your emergency fund, you might want to decide the details of that first.

You can input the amount you want to save in our savings goal calculator to help you determine how much you need to save every month to meet your goal.

Do you want to fund the first $1,000 with a no-spend challenge? My spending freeze was for six months.

What are the rules of a no spend challenge?

What items have you decided not to buy?  When my niece did this, it was only clothes and accessories.  So for a year, she bought no clothes, no shoes, no purses, no jewelry, and no other accessories.

When I did it for six months, I bought none of the above and also included no household decor and no books.  The book part was by far the hardest for me. I really love books!

What are the things you are most apt to overbuy on?

Remember, this is your game and they are your rules.  But don’t go easy on yourself. It is a challenge, so make it challenging!  You want it to feel uncomfortable otherwise, you will miss out on personal growth.

Where Is The Money Coming From Exactly?

You have homework to do.  Yes, we understand that we are not shopping anymore and we are going to use that money that from our no spend challenge to start an emergency fund.  

But how exactly do we find how much we used to spend and how that emergency fund gets fed?

We do a little digging. Collect all bank and credit card statements for the last few months and any receipts you might have.  

Take an average of how much you spend at Kohl’s, Macy’s, and Target each month and divide that by the number of paychecks in a month.  I have a feeling this exercise may be very eye-opening!!!

Let’s say you have four paychecks per month.

If you are spending $1200 a month at these stores, you will have that $1000 starter emergency fund in no time.  Divide that number by four and deposit $300 each paycheck into a separate “safe” account.

While you are doing this no-spend challenge, continue to make the minimum only payments on all bills and credit cards if you have them.

Remember Your “WHY.”

There are going to be moments, if you are used to going shopping, that will be hard.  But remember why you are doing this. Continue to think of the peace of mind that you will have once that starter emergency fund is in place.  

Think of how proud you will be after you follow through and complete your goals.  Visualize that money set aside in an account for your rainy day.  Remember why you are doing this and stay strong.

Some Other Suggestions.

  • Stay out of the stores!  I still go to Target just once a month now with a specific list and budgeted amount of cash.  I have learned where my weak spots are!
  • Unsubscribe to all those store emails!  You do not need to know every time jeans go on sale at Old Navy or Land’s End has a markdown on t-shirts!  Kick them to the curb!
  • Find a buddy.  Enlist a friend or family member to talk you out of a purchase if you are feeling vulnerable.  Someone who knows what your doing and someone who is STRONG. You will need that when you come across that perfect pink rain jacket for only $20!!!
  • Gift cards for special occasions are fair game. If it is your birthday during this spending freeze and your mom gives you a gift card for your favorite store, by all means, go.  Shop. Enjoy. But do not go over that gift card limit. And be intentional with what you purchase!

Good luck with your no-spend challenge and remember, YOU GOT THIS!!  Stay Strong!

About The Author

Sara Conklin is a wife, mom of two grown boys, writer, and Financial Coach.  She and her husband paid off over $100,000 including their house and Sara teaches others to do the same through coaching and living a frugal life.  Learn to save money, get out of debt, and live your best life over at FrozenPennies.com

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