Financial coach offers 3 tips for getting started (Video)

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While building a emergency fundIt is recommended that you keep enough money to cover at least three to six months of necessary expenses. This ensures that you can meet basic needs should an unexpected life event occur, such as being laid off or sustaining a short- or long-term disability.

But saving for more than six months’ worth of expenses isn’t a bad idea, according to financial coach Tanya Taylor. In a recent episode of the Money Glow Up podcast, Taylor described how a serious car accident and unexpected medical expenses for herself and her daughter quickly depleted her emergency fund.

Taylor said saving a year’s worth of money was crucial to his recovery.

“When I got into the car accident, I had emergency (funds) for almost a year, and they ran out very quickly because other things came up that were unexpected for me,” Taylor told Tiffany Aliche on Yahoo Finance’s Money Glow Up. podcast (see video above or listen below).

Taylor had to rebuild her emergency fund after spending enough money to last her a year, and she has some great tips for those struggling to get started.

Start with a budget

For many people living paycheck to paycheck, the prospect of building an emergency fund can feel nearly impossible. Deciding why you’re saving money is a good motivator when starting the process, Taylor said.

“Start with your why—why are you building your emergency fund?” he said. “Because if you don’t have a reason, you’re like, ‘Okay, why am I doing this?’ Something like this happens.”

Read more: The 4 best (and worst) places to stash your emergency fund

Taylor suggested creating a budget to get started. He said it’s easier to find additional funds to put into your emergency fund when you know where your monthly income is going.

“The budget is not intended to be restrictive,” Taylor said. “You need to be guided by the budget.”

This may seem discouraging at first. But by starting small, you can continue to create a safety net for unexpected expenses and situations.

“For some people, when they budget for it, it might be $20 a week, but then they keep finding ways to increase that amount so it becomes maybe $100 per paycheck,” Taylor continued. “Then you continue to improve it over time.”

Set a goal for your emergency fund based on necessary expenses (things you absolutely can’t live without, like housing, food, etc.) and start making a plan.

Automate deposits

Opening an account – ideally high yield savings account — your emergency fund can help you save money.

High-yield savings accounts offer more generous interest rates than traditional savings accounts, which can help stretch every ounce of savings as much as possible.

Read more: How to open a high-yield savings account: Step-by-step instructions

When you have a designated account to stash your emergency fund, it’s best to automate deposits and separate your emergency savings from money used for everyday expenses.

Podcast host Aliche often says, “Inappropriate money is saved,” and ensuring money in your emergency fund isn’t easily accessible will prevent that money from being used on other non-urgent purchases.

Review your budget regularly

Making a budget is one thing, but it needs to be revisited regularly to be most effective.

“Once you have the budgeting app or spreadsheet, you need to take the time to enter all the information and look back,” Taylor said. “Don’t leave this to chance.”

Reviewing your budget on a consistent basis will likely help you find ways to cut unnecessary expenses or save extra money; All of these will come together.

While it may seem like a lot of work, it never hurts to be prepared. In Taylor’s case, she learned that it was probably impossible to be financially overprepared.

“I just think about myself and how financially prepared I am,” Taylor said. “But when this accident happened, it was like… I really had to go back to the drawing board.”

Every Thursday, Tiffany Aliche — aka Budgetnista — shares inspiring money stories to help people achieve financial independence and live richer livesOpenMoney Shines. You can find more episodes on our website video center or watch preferred streaming service.

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