Do you have an emergency cash fund? Have you ever worried about what would happen if you couldn’t pay your bills? Or what if you needed emergency surgery — how would you pay for that?
Life is going along great for you. Your job is ok (aka, it’s bearable), and you’re excited about your side hustle business because it’s making you extra money. You’re doing great and you feel great.
Then your company decides to downsize… or you break your leg during your annual ski trip. Or some jerk runs a red light and hits your car (or maybe you’re the jerk and you hit someone’s car!).
You get the idea. Surprises happen, good and bad, and they can become major financial pitfalls very quickly—unless you have an emergency cash fund that is.
If you’ve got one of those, they can be the difference between a slight ‘blip’ on your financial road to security, or if you don’t have one, you can head into a downward spiral of credit card debt and worst case scenario, personal bankruptcy.
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“The point is to stop living paycheck to paycheck,” says Sophia Bera CFP, 32, whose firm, Gen Y Planning, caters to young professionals in their 20s and 30s. “And when you have an emergency [cash] fund it turns a major emergency into a minor inconvenience.”
As you get your side hustle business into full swing and your financial life changes and grows, you set up your initial emergency cash fund for those ‘raining day’ moments.
But what if you’re just getting started? How much should you have sitting in your emergency cash fund?
Follow the tips below to set up your own emergency cash fund, so you NEVER have to suffer financially again.
And if you do this right, it will also help you build and scale your side hustle into a full-time gig, so that not only are you financially secure, you’re also mentally secure because you’re doing what you love!
#1: Choose an Amount
A good goal to aim for in your emergency cash fund is to have at least three months of your NET pay set aside.
So if you’re earning $3,000 per month, then you need to have $9,000 sitting in your emergency fund.
You’re looking to have enough money to cover your basic living costs for a few months. These would include:
You could also use this emergency cash fund to help you transition out of your full-time job into your full-time side hustle, allowing you a bit of breathing room in the beginning.
#2: Start Saving Now
Think you have to wait until you’re out of debt to start saving? Think again. Debt begets debt… so start saving now, even if it’s just small amounts, like $50 a month, or $200 a month, some savings is better than no savings.
Once you’ve kicked things off, then you want to look at paying off your debt, especially if you’re planning to go full-time in your side hustle. Focus on paying off the high-interest debt first, particularly credit cards, and work your way down.
Make a plan for yourself, print it out, and cross things off as you get rid of them. Just like you made a plan to start a side hustle, you have to make a plan to save and pay off debt.
#3: Make Contributions Automatic
Make it easy on yourself and set yourself up for success by setting up automatic contributions straight from your pay into your savings account as soon as you get paid.
By doing this, you won’t even miss the money. You may even be able to do this through your company’s payment system, where they can split your pay into two amounts into the different bank accounts.
This might look like this:
Say you’re getting paid $3,000 per month (after taxes). You decide that you want to save $500 each month. Rather than have this amount come out of your bank account when you get paid, you have it paid directly into your savings account from your employer.
The amount that lands in your normal bank account is $2,500. You don’t ‘see’ the $500 at all.
Remember, it won’t happen overnight. Set yourself a realistic target amount and review every 30 days to make sure you’re not trying to save too much, too soon. Because if you do this, you’ll only set yourself up for failure.
#4: Use a New Side Gig to Add Funds
Yep, just because you’ve got one side hustle going, doesn’t mean you can’t start another. And if you’re super smart (and I know you are!) then you could set up a semi-passive side gig to completely fund your emergency cash fund, or as I like to call it, my “get outta jail free card” 🙂
Have a look at the type of skills you’ve got in your arsenal, and then look at what you’re doing in your side hustle. I’m sure there are ways that you could expand or add services to earn a little more cash.
Some ideas might include:
- You're a writer who writes website copy for small businesses and decide to start offering social media copy as well.
- You’re a graphic designer that specialises in logo design and decide to start offering DIY classes to teach others how to create their own logos.
- You’re a dog walker and decide to add meal planning for dogs to your services as well.
As you can see, there are so many different ways that you can add more side hustles to what you’re already doing, it just requires a little ‘thinking outside the box’.
And as for your emergency cash fund — you need to implement that now. I didn’t have this when I left my job to go full-time as a freelance writer and 4 weeks later… my now husband was laid off from his full-time job.
Goodbye normal, hello stress city. If we’d had an emergency cash fund in place, this time in our lives wouldn’t have been anywhere near as stressful.
Do yourself a favour, create an emergency fund today! You’ll thank me later 🙂