Whether it’s a costly car repair, a burst pipe, or a visit to the emergency room, unexpected expenses can occur at any time. Having an emergency fund can help ease the financial burden of unanticipated expenses such as these. However, many Americans have little to no savings in the bank to cover a financial emergency. If you fall under this category, it’s time to start building an emergency fund now. 

We know that building an emergency fund can be a challenge if you’re struggling financially, especially if you have debt. At Lendah, not only have we helped thousands of people manage millions of dollars of debt so they can start saving, but we’ve also helped them pay for unexpected expenses and emergencies. In this article, we’ll walk you through how to build an emergency fund and how to pay for unexpected expenses without one. 

Why Do I Need an Emergency Fund?

Having an emergency fund is essential to your overall financial health. Without it, you’re likely to take on more high-interest debt when financial emergencies arise. Even with insurance coverage, unanticipated events such as a car accident, medical emergency, or damage to your home can cost significant money out-of-pocket. Far worse, you could find yourself in detrimental financial hardship if you experience a loss of income without an emergency savings account to fall back on. 

Find out why unsecured loans are an ideal way to pay for emergency home renovations. 

How Much Money Do I Need in My Emergency Fund?

Ideally, the amount of money in an emergency fund would be enough to cover three to six months of essential expenses, including but not limited to housing, utilities, food, and transportation. If you’re struggling with debt and have a lower income, saving three months’ worth of expenses may seem impossible. Start by focusing on a much smaller goal and continue to save over time. Even just $500 or $1000 can help with an expected expense. 

Should you focus on saving money or paying down debt first?

How Do I Build an Emergency Fund?

Building an emergency fund isn’t difficult, but it does take time, patience, and discipline. Follow these simple steps to get started. 

  1. The first step to building an emergency fund is to review your budget. To start, take note of how much you can allocate towards an emergency fund each month. Next, look for any expenses that you can cut or reduce so that you can contribute even more. 
  2. Talk to your bank about splitting your direct deposit so that a specified portion of your income is automatically deposited into your emergency savings account each pay period. If you don’t get paid with direct deposit, ask your bank to help you set up a monthly automatic savings transfer or look into verified apps that can do this for you. 
  3. Tuck away as much “extra” money as you can. Allocate any additional income, such as refund checks, unexpected bonuses, or side-hustle money, to your emergency savings account.
  4. Consolidate your debt to free up more funds in your monthly budget. Consolidating your debt could lower your overall monthly debt payments, allowing for more money to be contributed to your emergency fund. Learn more about the benefits of consolidating your debt.
  5. Slowly increase the amount of money you save each month as your budget allows. Keep saving until you reach your emergency fund goal. 

How Can I Pay for Unexpected Expenses Without an Emergency Fund?

Emergencies and unexpected expenses can happen at any time, whether or not you’ve built an emergency fund. If you’re experiencing a sudden financial hardship and need funds now, an unsecured personal loan may be your best option. Unsecured loans are an effective tool for large unexpected expenses and financial emergencies because they do not require collateral, rarely have restrictions on how they can be used, and generally have lower interest rates than credit cards. 

Learn more about unsecured personal loans. 

Finding the Best Unsecured Personal Loan with Lendah

With so many lenders to choose from, finding the best unsecured personal loan can be overwhelming. At Lendah, we do all the work for you. We partner with leading lenders to match our clients with the best possible loan options to fit their needs. If you’re experiencing a financial emergency or have an unexpected expense that can’t wait, fill out our online application or give us a call at 844-860-0766 to speak to one of our knowledgeable and compassionate loan consultants today.