How to Rebuild a Depleted Emergency Fund | Scripbox

HOW TO REBUILD A DEPLETED EMERGENCY FUND Published on September 22, 2020 by Satyam Pati

1. MAKE A GOAL First of all, arrive at a target emergency fund amount and the time frame within which you plan to achieve it. Usually, about four to six months of essential household expenses are recommended as an emergency fund.

2. START BUDGETING If you have not yet started the process of budgeting, do it now. Categorize your expenses into various heads such as housing, utilities, food, transportation, and savings, and so on.

3. BRIDGE THE GAPS The budget gap can be bridged either by slashing unnecessary spending or by increasing your income. Try and look at one major expense which you can save on. Or perhaps curb a large portion of your discretionary spending.

4. CAPITALIZE ON THE WINDFALLS Recently, got a tax refund or bonus? Instead of splurging it, channelize it towards stocking up the emergency fund. It will accelerate your progress towards the goal.

5. CALIBRATE OTHER SHORT-TERM GOALS It is important to build your emergency fund first. So, put on hold your monthly contributions towards other short-term goals like buying an electronic gadget.

6. AUTOMATE SAVING Make saving a regular habit. Automate the investing process through a direct debit from your bank account so that you don’t skip any contributions.

7. PARK SAFELY Liquid and ultra-short-term debt funds – fit the bill as against the traditional saving instruments like that of bank fixed deposits. By investing in the former, not only is your capital nearly safe and highly liquid, but you also earn better post-tax returns.

8. FINAL WORD Replenishing your emergency fund should be your first priority, once things get back to normal. Cut unnecessary spending and recalibrate your short-term goals to save for the rainy day.