Plan For Tomorrow | What to do when your emergency fund is gone
A young woman works through her emergency fund on paper and a tablet

What to do when your emergency fund is gone

Monday 8 March 2021 | Reading Time: 6 minutes

So, you made the smart choice to build an emergency fund years ago to ensure you could weather an unexpected financial crisis. But then something unexpected happened and your funds were depleted. What do you do now? We have some suggestions to help you rebuild.


Build a starter emergency fund

With your funds reduced or gone, you’ll need to be proactive in putting money into a new account that you only use for getting through the next emergency. What constitutes an emergency? An emergency is any unforeseen event that makes it difficult for you to get by. To ensure you can weather a future crisis, you should look to build a starter emergency fund or baby emergency fund. A starter emergency fund is different than a full emergency fund because it’s a smaller amount of money that you build up quickly. Your starter emergency fund should be based on your expenses, not your monthly income, and it should cover at least one month’s worth of your essential expenses. To get there, you’ll have to crack down on your spending.

Create an emergency budget

The first thing you should do to start a new emergency fund is rebuild an all-new budget. This is exactly like building a regular budget based on your income and expenses, but you want to cut any spending categories that aren't necessary. In other words, you should try and create a much stricter budget that boils your expenses down to essentials. This is temporary until you stabilize your finances and rebuild your emergency fund. Consider: 

Pausing non-essential money goals – Before you used up your emergency fund, you may have been paying off credit cards or school loans more aggressively. That’s a smart way to tackle your debt. But in this situation, you want to go back to making the minimum payments on what you owe, until you have your starter emergency fund in place and perhaps beyond. 

Cutting non-essential expenses – Take stock of each subscription and membership to determine if it’s essential or not. If you can do without it, get rid of it and use put the extra money to build your emergency fund. Look to cut out any luxuries like cable or TV apps. Eat out at restaurants less, cut back on your fun or spending money, cut your clothing budget, reduce your gift buying and cancel your travel or vacation plans for a while.

Reducing electricity use – Chances are you are at home more and you're using more power for lights and your other appliances. But there are ways to lower your utility bills:

  • Turn down the thermostat
  • Use less air conditioning
  • Don’t leave the computer running
  • Only run the dishwasher with a full load
  • Hang dry laundry instead of running the dryer
  • Install energy-efficient lightbulbs

Reducing your grocery bill – The monthly bill for food is typically one of the largest household expenses. To help save money while you rebuild your emergency fund: 

  • Plan Your Meals for the Week – This will streamline your shopping list at the store and tighten your budget.
  • Use Coupons – Saving on groceries is a great idea, but make sure you focus on using coupons for the items you’ll use. Many people are tempted by sales on items they won’t eat. If you don’t waste food, you’ll save money.
  • Make Extra Meal Portions – Try making more of your planned dinners and eat leftovers the next night, or have them for lunch. This will ensure you eat the food you’ve purchased AND save you time!

Track your spending

To make your emergency budget work, you need to track your income and expenses. This practice is especially important when you’re in emergency mode. To keep track: 

  • Download a free finance app to make tracking all your accounts easier.
  • Save your receipts and keep a running tally of what you’ve bought.
  • When you use a credit card, make sure to check your balance so it doesn’t get too high.

Make additional money

Creating an emergency budget by cutting back is the best way to ensure you can create a new emergency fund. But if you want to rebuild it faster, or you simply wish to increase the amount you’re saving each month for the next crisis, there are a variety of ways to supplement your income. Consider taking on a part-time job or starting a side hustle for extra cash. You can pick up delivery jobs. Drive passengers for a company like Lyft, sell stuff you don’t need, tutor students, babysit, pet sit, or dog walk. There are so many ways to make a little extra cash. 

Develop a backup plan

Losing your emergency fund can be scary. Even scarier is the possibility of another emergency happening. Having an emergency fund in place helps tremendously, but if you want to be even more prepared for the next crisis, come up with a backup plan. This could entail coming up with a short-term strategy for finding employment, taking out a loan, or getting help from family or friends. It’s also a good idea to have a backup budget on standby.

Make a backup budget

Along with working an emergency fund into your finances, you should also make sure to maintain and reassess your budget often. Ensuring that your budget is in good shape and efficient is not only a great habit, it will help you prioritize and adjust items more easily to cover any unexpected costs. You may also consider creating a backup budget that streamlines your expenses in an emergency. Look over your current budget and figure out what you can cut if necessary. Planning an emergency budget now will make it much easier to deal with a crisis if it comes.