Fast Track to Saving for Emergency Fund

Learn the art of patience. Apply discipline to your thoughts when they become anxious over the outcome of a goal. Impatience breeds anxiety, fear, discouragement and failure. Patience creates confidence, decisiveness, and a rational outlook, which eventually leads to success. -Brian Adams

So after a year and half of working, I have finally saved enough money to reach my goal for my emergency fund. As a quick side note, if you do not have an emergency fund I suggest you begin saving for one as I cannot stress enough the importance of having one. Now back to our regularly scheduled programming, I can remember at the start of that undertaking, it seemed like it would be almost impossible to reach my goal. However with the technique I'm going to detail in this article, I will explain how I was able to reach my goal.

The technique that I used is something I coined as "ramping up". I got this idea from Dave Ramsey's "Debt Snowball" effect When I first opened my emergency fund (e-fund) account, I started it with $1000. After that point, I decided how much money I could budget for this fund and set an automatic investment (i.e. minimum payment to this fund) from my checking account to the bank that housed my e-fund. Initially, I allocated $250/month from my budget to go directly into my emergency fund. It is a great idea to set up an automatic investment each month, however, personally, the $100/month was not providing the security that I wanted fast enough. To actually get some real sense of accomplishment, I began to take whatever extra money I had (whether it be from a bonus, excess from good budgeting for the month, birthday money, tax return checks, rebates, etc) and began my "ramping up" process to immediately deposit all extra income into those accounts.

This extra effort into funding my emergency fund provided results quickly where I was able to increase my initial deposit from $1000 to quadruple that in a matter of months. This provided extra motivation because it gives a sense of accomplishment and security to know that you now have a large "safety net" in the event that an emergency arises. In addition to that, once you have this fund built up, you actually start to see decent returns from the interest that the bank pays. After all, it is a beautiful thing to see a free $10/month given to you by the institution housing your fund just for letting them borrow your money. What is even better is the fact that the money that they are paying you on top of your savings is compounding also with your principal savings to add up to even more money over the lifetime of the savings since the bank is also paying you interest on the previous interest they added to your account.

All in all, for this to work, it does require a substantial amount of discipline. However with cutting costs at every opportunity as well as saving (rather than spending) any extra/unexpected income, one can find that they reach their goal for their emergency fund a year or two ahead of schedule. At that point, let the real investing begin...