4 Steps to Prepare for an Income Emergency

If a financial calamity like a layoff or illness hit you today, would you be ready?

Many Americans — if they were honest — would have to answer “no” to that question. But you can do better.

Money Talks News founder Stacy Johnson recommends taking three crucial steps toward building an emergency fund.

Step 1: Assess your situation

Take stock of your income, bills and savings. Create a baseline budget — the absolute minimum required for food, shelter, utilities and debts, such as auto loan payments or minimum balances due on credit cards.

Compare this with your household’s current income. If you see you’re not going to make it, turn to a nonprofit credit counseling agency for some free help. Counselors can help you develop a workable budget and may be able to negotiate with your existing creditors.

Stop by our Solutions Center to find free debt help.

Step 2: Track your spending

See where your money is going now. Our partner YouNeedABudget can help you build a budget that will ensure more of your money ends up in your emergency fund. For more, check out “This Tool Makes It Easy to Track Your Spending and Build Your Savings.”

Once you have established a solid budget, look for ways to save. For example, take a bite out of food bills by cooking at home, bringing lunch to work and scheduling potlucks with friends instead of going out to restaurants.

Also, trim your transportation costs with a carpool, or walk or ride your bike more. “Do whatever you can to use that car less,” Stacy says.

Step 3: Trim your monthly expenses

Take a look at your utilities, cable and phone bills. These may be small, but they add up. Look at each one individually, and see where you can cut.

For example, there is plenty you can do to cut the cost of cooling a home, from using awnings to turning up the temperature setting on your air conditioner. You also can cut the cable TV cord and find easy ways to save on your cellphone bill.

You can also hire professional help that will look for ways to cut your costs. To learn more, check out “Should You Hire a Service to Negotiate Your Cable and Other Bills?

Step 4: Plan ahead

You can also take steps now to prepare for any financial crisis that might lie ahead. For example:

  • Pay down debt so you can redirect your income toward savings.
  • Save any windfalls for a rainy day.
  • Refinance your debt to increase your cash flow so you can save more.

For more tips when building an emergency fund, check out “9 Tips for Starting an Emergency Fund Today.”

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
5 Ways to Save up $500,000 in 15 Years
5 Ways to Save up $500,000 in 15 Years

Even if you’re behind in preparing for retirement, there’s still a way to pull together a solid nest egg if you focus.

15 of the Most Outrageously Overpriced Products
15 of the Most Outrageously Overpriced Products

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

8 Surprising Things No One Tells You About Retirement
8 Surprising Things No One Tells You About Retirement

Knowing what to expect can help you prepare for — and adjust to — life in your golden years.

How to Get Rid of 6 Hard-to-Sell Things
How to Get Rid of 6 Hard-to-Sell Things

Find out where to sell, donate or recycle items — and feel good about it.

3 Ways a Health Savings Account Can Improve Your Finances
3 Ways a Health Savings Account Can Improve Your Finances

Open an HSA in minutes to help you save on taxes, cover medical expenses and grow your retirement nest egg.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Whether you resell it for a big profit or add it to your own wardrobe, this type of clothing is a hidden steal.

10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

This Simple Mistake Might Weaken Your COVID-19 Vaccination
This Simple Mistake Might Weaken Your COVID-19 Vaccination

Avoid doing this before you get vaccinated.

10 Cars You Are Most Likely to Keep for 15 Years
10 Cars You Are Most Likely to Keep for 15 Years

The cars that owners hold onto the longest have one thing in common, a new study shows.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

10 Deep Discounts Available on Amazon This Friday
10 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

9 Things You Should Never Leave in a Car
9 Things You Should Never Leave in a Car

Thinking of leaving these possessions in a car? Prepare for unexpected consequences.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

9 Mistakes People Make When Cleaning With Vinegar
9 Mistakes People Make When Cleaning With Vinegar

Cleaning with vinegar can save you a lot of money, but using it like this can cost you.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

10 Things Successful Retirees Do Differently
10 Things Successful Retirees Do Differently

These habits and characteristics can help put you on the track to success.

7 Costly Health Problems That Strike After Age 50
7 Costly Health Problems That Strike After Age 50

As we age, our bodies wear down. Here is how to cut costs associated with some common ailments.

29 Purchases That Can Save You Money Every Day
29 Purchases That Can Save You Money Every Day

Sometimes, you’ve got to spend to save.

7 Things I Never Buy at Costco
7 Things I Never Buy at Costco

A bulk buy isn’t always the best buy.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.