Emergency Funds & Plans: How To Stay Ready When Life Gets Messy
The notion of staying ready to get ready isn’t just a saying, but it’s a solid plan. Life is full of surprises, and emergencies often show up when we least expect them. From sudden medical expenses to car troubles or even losing your job, these events can shake your financial stability if you’re not prepared. Life keeps life-ing and the unprecedented can become a pain. But this is where your paper comes in.
Another way to reframe your emergency fund? Having BOTH an emergency fund and an emergency plan can help you tackle these challenges with confidence. In this guide, we’ll show you how to prepare for the unexpected, step by step. You’ve heard that I have this amount of money in their emergency fund or don’t have one, heck I’ve talked about my own situation with not having an emergency fund before. But one of the things that I came to learn from that experience and tell my clients is - what’s the plan?
With the paycheck you have on your next payday, how long would you last in case you had an emergency or if life threw you a lemon - how could you build your lemonade? This is what this blog post is going to be for you. I’ve been seeing more and more layoffs, inflation kicking our behinds, and medical emergencies coming up that insurance, HSAs/FSAs or even GoFundMe could cover. Let’s get you started - no matter if you fully fund your emergency fund or have “some” - building a plan is key that this blog post will unlock.
Part 1: Building Your Emergency Fund
An emergency fund is your financial safety net. It keeps you from relying on credit cards or loans when life happens—and it’s the foundation of any solid financial plan.
Step 1: Understand Why You Need It
Emergencies can hit your wallet hard. A medical bill, a car repair, or even a broken appliance can throw your budget into chaos. Most Americans don’t even have $400 saved for emergencies, let an alone $1000—a sobering statistic.
The takeaway? An emergency fund gives you the breathing room to handle these surprises without going into debt.
Step 2: How Much Should You Save?
While financial experts often recommend saving 3–6 months of essential expenses, this can feel overwhelming. Start with what you can, and build from there:
Mini Goal: Save $1,000 as a starter fund.
Mid Goal: Cover one month of essential expenses (this is my go to factor).
Big Goal: Work toward 3–6 months’ worth of living expenses.
Pause: Do you even have a baseline budget of how much it costs your life to run and what essential expenses you need to handle in case life handles you? Rent/Mortgage, Utilities, Food, etc. - you get it. Yes, I want you to have enough to still treat yourself, but this is critical friends.
Step 3: Make Saving Automatic
Consistency is key. Here’s how to make saving easy:
Automate Transfers: Set up a monthly transfer to a High-Yield Savings Account (HYSA), even if it’s just $25 or $50.
Redirect Found Money: Funnel tax refunds, negotiated bills, bonuses, or windfalls into your emergency fund.
Cut Expenses: Cancel unused subscriptions or cut back on takeout. Every dollar adds up.
Part 2: Write Out Your Potential Emergencies
Before building an emergency plan, it helps to anticipate the kinds of crises you might face. This isn’t about creating fear—it’s about being proactive.
Step 1: Brainstorm the “What Ifs”
I know that this might seem like forward-shadowing, but you still need to take the time to determine the risk to handle the roadmap to build the reserves to handle it. Take a moment to think about the emergencies that could realistically happen in your life. Here are a few examples to get started:
Job Loss: How much would you need to cover rent, utilities, and groceries while you look for another job?
Medical Emergency: What’s your deductible or out-of-pocket max if you have to visit the ER?
Car Trouble: What’s the cost of a major repair or a replacement tire? Suggest that you create a car sinking fund to handle car expenses. That can come later.
Unexpected Travel: If you had to buy a last-minute plane ticket, how much could that cost?
Home Repairs: Could you afford to fix a broken water heater or replace a roof leak?
Step 2: Estimate the Costs
Write down each potential emergency and how much it could cost. Be specific. For example:
Job Loss: $3,000/month for three months = $9,000
Car Repairs: Average repair = $1,200
Medical Bills: Deductible = $2,500
Step 3: Leverage the Estimates
Use your list to shape your emergency fund savings goal. This way, your fund isn’t based on a random number—it’s tailored to your life.
For example, if your emergencies total $1,500, aim for at least $250 as a starting point.
Part 3: Creating an Emergency Plan
Your emergency fund is your financial cushion, but an emergency plan is your playbook. It tells you what to do when life throws a curveball.
What Is an Emergency Plan?
It’s simple: If X happens, then I will do Y.
Think of it as your action plan for tackling crises with clarity, even when emotions are running high.
How to Build Your Plan
Identify Common Scenarios
Start with the emergencies you wrote down earlier. For each one, ask yourself:
What’s my first step?
Who or what can help me?
How much of my emergency fund will I need?
For example:
If I lose my job:
Review what severance you have and how long should last against your emergency savings and would it case you to tap your reserves/funds?
File for unemployment immediately. How long will it take to start?
Cut non-essential expenses like streaming subscriptions.
Use my emergency fund to cover rent and groceries while I job hunt.
If my car breaks down:
Get multiple repair quotes.
Use my emergency fund to pay for the repair.
Consider public transit until I can save for a replacement.
List Resources and Support
Know what’s available to you:
Savings: Your emergency fund is the first stop.
Insurance: Review your health, car, and renters/homeowners policies annually.
Community Resources: Research local assistance programs for rent, utilities, or food.
Side bar: Create a list of what source of income/cash you can pull from and WHEN would you implement that emergency pull?!
Communicate your plan
Share your plan with a trusted friend or family member. They might offer insights you hadn’t considered—or even be part of your emergency support system. Have this written so if you feel that you want to crash out, there’s a plan in place.
Part 4: Feel Funded, Not Guilty
Let’s shift the mindset: If you have to use your emergency fund, don’t feel bad—feel funded.
Your emergency fund exists for moments like this. Using it isn’t a failure—it’s proof that you planned ahead and set yourself up to handle what lemon coming at you.
Here’s the silver lining:
If you had enough to handle the emergency, you’re already ahead of most people.
Once the crisis passes, focus on rebuilding your fund to stay prepared for the next challenge.
Also, leverage what you learned. Give yourself grace that you had the funds to support yourself.
For tips on rebuilding your fund, check out this post: In Case of Emergency: Rebuilding Your Emergency Fund.
Part 5: Emergencies Beyond Job Loss
Emergencies come in many forms, and all of them have the potential to rattle your budget. A quick exercise - pull out a sheet of paper or your phone and jot down everything that you had to handle outside of the norm over the last 18 months. Then how much did it cost to handle and how did you handle it? Now, let’s explore a few beyond just losing your job:
Medical Bills
Action Plan: Review bills for errors, negotiate a payment plan, and use your HSA/FSA if available.
Fund Tip: Always ask about financial assistance programs. Many hospitals offer them.
Natural Disasters
Action Plan: Know your insurance policy, keep an emergency kit, and have a backup plan for housing. I talked about this over on this blog post about preparing for natural emergencies life wildfires, flood, hurricanes, etc.
Fund Tip: Digitally back up important documents like insurance policies and IDs.
Unexpected Family Needs
Action Plan: Budget for last-minute travel or caregiving costs.
Fund Tip: Keep a small portion of your emergency fund in a checking account for easy access.
Final Thoughts: Start Small, Stay Ready
Emergencies don’t have to derail your financial future. By writing down potential crises, estimating their costs, and creating a tailored plan, you’re setting yourself up to handle life’s unexpected moments with confidence.
Start small, automate your savings, and rehearse your emergency scenarios.
Remember: The goal isn’t perfection—it’s progress. Give yourself grace as you have to grit through this - no matter what it is. You got this, fren!
Want more context? Check out these related articles: