8 ways to save for a short-term emergency fund (or any personal finance savings goal)

For the next 2 or 3 posts, I will be addressing questions that have come up over the last few weeks. After posting the article about creating and managing a short-term emergency fund, I received the following question:

I was wondering if you could mention some practical ways of building a STEF; any advice would help, especially for those on irregular incomes.

There’s really no trick to building an STEF. It’s mostly a matter of focus and making it a priority. That being said, here are some ideas to help get you started.

1. Make it a priority – Once your fixed bills and necessities are funded in your budget, your next highest priority should be building your STEF. You’ll hear many financial advisors talk about paying yourself first. While they typically are referring to saving for retirement, saving for a STEF would also apply.

2. Use easily-divertible savings or debt reduction – One of the quickest ways to build your STEF is to temporarily divert money that you’re currently using for savings (retirement or college) and debt reduction. Often these amounts are relatively large and can accumulate quickly.

I DO NOT recommend diverting funds going into a 401K or that are hard to divert. At my work it would take paperwork to divert my 401K and then I would have to wait until the open enrollment period to start contributing again. In such cases, it’s better to leave it alone.

3. Sell “stuff” – Most people have hundreds, if not thousands of dollars of “stuff” laying around; Electronic gadgets that are no longer used, old mp3 players, sporting equipment, TVs, furniture, clothing, toys, computer games. Have a huge garage sale!!! Not only will this give you a nice jump start on your STEF, it will also lighten your load physically and even emotionally. This method can be so effective, some people can even save their whole STEF by selling stuff.

An alternative to a garage sale is selling things on ebay.com, half.com or craigslist.com. There are many great auction and second-hand sites that allow you to sell your stuff (if you know of a good one, leave a comment). My wife commonly buys clothes on ebay for our son in bundles. She just bought a bundle that cost about $1 an item and it came with about 20 items. Suddenly older clothes that seemed worthless can now make you a tidy sum.

4. Buy large-ticket items at a discount – I have a friend that almost always checks ebay first when he wants to buy something over $100. I wouldn’t necessarily recommend buying everything used. If you’re buying less-expensive items and only saving a dollar or two, it’s probably not worth the effort, at least for me personally. If you have the time and inclination, go for it. On items over $100, however, your savings can be significant. Buying used items on an auction or second-hand website, going to garage sales, or shopping at second-hand stores can yield tremendous savings on big-ticket items.

If you have kids, you can really take advantage of second-hand items. By visiting a quick round of garage sales on a weekend, you can find a ton of used toys, clothes, and kid furniture at a small fraction of the “new” price.

5. Go on a spending fast – I wouldn’t recommend doing this for the long term, but for a month or two you could consider a spending fast. Find all the variable expenses that you could significantly lower or eliminate for a short term. Take your lunch to work for a month, put your newspaper subscription on hold for a month, clip coupons, go to the library instead of the movies. Making small adjustments can add up with enough focus. A word of caution though; this suggestion alone won’t get you enough for a full STEF very quickly. You will also need to use one of the other methods. If anything, this suggestion puts you in the right frame of mind and helps your focus.

6. Cancel unnecessary billed “stuff” – Many people pay well over $100 a month on various subscriptions such as cable, internet, cell phones, publications, movie-rentals (netflix), etc. While you want to be careful about incurring large cancellation fees, see if you can cancel or eliminate those you don’t need or use. Or try to live without them for a month or two. I’ve never tried it, but I bet you could put your satellite or cable service on hold for a month or two. You might even get out and do something active (gasp)!

7. Get temporary employment – Get a newspaper or pizza delivery job for a month. Or better yet, find some freelance work involving something you enjoy. Doing so may even lead you down the path of becoming self-employed. If you work as a web developer, call some local small businesses and see if you can do website work for them. You’d be surprised at how open many businesses are open to hiring temporary contract work to solve small annoyances.

A good place to start is a friend or family member’s place of employment. You could simply have them ask a manager or executive if there are any small, annoying projects they would like to get done and out of the way. I can almost guarantee they will think of something if they think long enough. One of my co-workers has his wife do mailings for our company that go out periodically and she makes a nice side-profit.

One last suggestion on this topic. Find some skill or job you would like to have and see if you can get a job learning it. Have you always wanted to learn to do construction? Ask around and see if there’s a builder that will let you work with him on weekends. Most people don’t take time to be creative when it comes to making money. A little creativity can go a long way and make you stand out, while simultaneously helping you achieve your financial goals.

8. Reallocate funds – Look in all your accounts and allocate the current balances. Once you know how you’re going to use every dollar (make sure you allocate enough for paying bills) see if you can reallocate any of those funds as a STEF. Most people have an amorphous blob of money sitting in their accounts and don’t know exactly what it’s for. They just hope there’s enough to pay all the bills for the rest of the month. By allocating your balances, you may find there’s some money left to start your STEF. Some will find large sums of money they can use. In fact for those who live within their means but just don’t have a very good budgeting system, you might find you already have your full STEF just sitting around (wouldn’t that be nice?).

Make it your #1 personal finance goal – Accumulating a STEF should be your number one personal finance goal. Make a goal to accumulate a STEF within a specific time period and think about new and creative ways to meet that goal. There seems to be a law of the universe that once you totally dedicate yourself to achieving a goal, things often fall into place that you could never have anticipated. In addition to specifically taking action, many find that just by focusing on accumulating a STEF, they have unexpected windfalls that help them achieve their goal; a bonus at work, an unexpected tax refund, a generous gift.

How are you going to save your STEF? Leave a comment and let us know!

Posted in Budgeting, Emergencies, Finance, Finances, Money, Personal Finance, Saving | 18 Comments »

18 Comments to “8 ways to save for a short-term emergency fund (or any personal finance savings goal)”

  1. Jodi Says:

    Coming up in the next few months are some FABULOUS ways to build an STEF: Christmas gifts, bonuses at work, and tax returns. Using a combination of these three things my husband and I were able to transfer from a credit card-based system, to a zero-based budget cash system (this is hard because you typically pay credit cards a month AFTER you spend the money, but you need the cash a month BEFORE. So we basically had to have enough to cover an extra month of expenses.) We also used these big chunks of money to get our STEF established and are now just contributing $50 per month to a longer term emergency fund. If we use the STEF money during the year, we don’t fret about it, we just make sure that when we get our tax return or other bonus money we replenish that fund first. It works well for us and like I said this is a great time of year to start planning to use that money for getting your finances in gear instead of allocating it for a fancy vacation, house renovation project, etc.

  2. Lifehacker Says:

    8 ways to reach a savings goal

    The Getting Finances Done weblog suggests 8 different ways to reach a short term savings goal. For example: Sell “stuff” – Most people have hundreds, if not thousands of dollars of “stuff” laying around; Electronic gadgets that are no…

  3. Getting your short-term emergency fund going at simplbudget Says:

    […] Getting Finances Done » 8 ways to save for a short-term emergency fund (or any personal finance savings goal) There’s really no trick to building an STEF. It’s mostly a matter of focus and making it a priority. That being said, here are some ideas to help get you started. […]

  4. Jeff Says:

    While selling a bundle of clothes (and many other things) on eBay for $20 may be right for some people — it’s quick cash — it often makes more sense to donate such items and take a tax deduction (depending on your income level, of course). Donating is a nice thing to do, helps your community, is relatively easy, and can usually get you the same approximate return from Uncle Sam — even if you’re honest about the value of items.

  5. Sarah Says:

    Great tips. I’m currently working on my emergency fund, and have found that the best way to do it is in monthly automatic drafts into a high yield online savings account. You can start with small amounts and go bigger as your budget allows.

  6. Randy Says:

    Just found your site and it is great! One question I have about zero-based budgeting is – after I’ve allocated dollars each month toward STEF or cushion (or whatever fund that ACCUMULATES $ in my checking account) is how do I keep track of the balance of that particular fund? For instance – I budget expenses, which are taken out when paid, but I also budget STEF and cushion and they accumulate in my checking account. How do I easily track my STEF balance and cushion balances, especially if I have to dip in them?


  7. sjpeer Says:

    Randy, thanks for visiting! There are a number of ways to deal with keeping track of the various categories you\’ve accumulated. I hope to address that very issue very soon so stay tuned.

    The short answer is that you can track them either using multiple \”real\” accounts or by creating \”virtual\” sub-accounts within one physical account. You would then track the balances of each category on paper, a spreadsheet, or using quicken.

    If you dip into your STEF during the month, I wouldn\’t worry about tracking it througout the month unless you\’re really tight. You just need to make sure you have a trusted system in which you can reconcile the amounts on a monthly basis.

    I will be addressing the main checkpoints you need to verify on a monthly basis to keep track of your various funds.


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