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How to Save 6 Months of Living Expenses

How to Build an Emergency Fund

For many people living paycheck to paycheck, the idea of building up your savings account sounds daunting if not impossible.  But what if you could save up enough to have 6 months worth of living expenses tucked away for an emergency?  It isn’t as hard or far-fetched as it sounds.  With a budget, proper planning, and a lot of will power you can build up your savings account.

Step One:  Set up a budget

You cannot get serious about saving money until you have put together a monthly budget.  You need to know how much money you have coming in each month, but more importantly you need to know how much money you have going out.  For instructions on how to set up your budget, read How to Budget: Part I and Part II.

Step Two:  Lower your monthly expenses

Any money you save from eliminating or reducing expenses is money you will put directly into your savings account.  Here are some ideas for cutting back on expenses:

  • Cancel your cable or satellite service. This is one of the harder things to do because we love watching live sporting events, and our favorite shows.  But you can get creative and still have your shows. Watch great family movies online instead of paying $30 a month for cable. Watch sports events at a friends house or at a sports bar.  And for regular shows, most networks now have episodes of their most popular shows online. is a great place to watch shows, as is YouTube.
  • Get organized with your bill paying. If you find you pay a lot of penalties for late payments, then you will benefit greatly by getting organized.
  • For bills like your rent or mortgage, phone, and credit card payments, set up an automatic bill pay that pays those set bills at the beginning of each month.  Make sure you set them up to be deducted after your paycheck is deposited in the bank – you don’t want to incur any additional overdraft fees.
  • Set up a filing system.  On my desk I have a file holder with labeled files I use regularly.  When the mail comes in, it either goes in the trash, through the shredder, or in the designated file.  This eliminates the dreaded mail piles where bills get lost or overlooked.
  • Pick one day a week for paying bills.  My day is Friday.  Every Friday I go through the files on my desk and pay any bills that are due.  This system protects me from paying any late payment fees.
  • Eat at home. Dining out, ordering pizza, and zipping through the drive-thru are all very convenient, but are a major money leak.  Cook at home and use the money you would have used on dinner out, and put it into your savings account.
  • Shop Smart. In my household, I have found that groceries is the one area that is the easiest to cut back.  And no, that doesn’t mean you have to serve Ramen noodles and beans every meal.  Use coupons wisely, use them at stores that double or triple the coupons, and use them on sale items.  That will maximize your savings.  Discount grocery stores like Aldis are also a great place to shop.
  • Lower interest rates. If you are making monthly payments to a credit card, call and see if you can get your interest rate lowered.  It will depend upon your payment history and your credit, but often times the bank will lower your interest rate and you’ll have less to pay off.
  • Make cash purchases only. This is very simple – if you don’t have the money to pay for something with cash, then don’t buy it.  Think about it this way, your goal is to build up your savings account, so why counteract that with running up your credit card bill?
  • Cut out all unnecessary spending. This is where your will power comes in.  You must weigh each purchase you make against your need to build up a savings account.  Which is better, the Venti Vanilla Latte, or the money in savings?  It requires you becoming very aware of every penny you spend and deciding if it is a necessity, or a luxury.  For more on this read A Frugal State of Mind.
  • Increase deductibles. This is a very personal decision and one that needs to be given a lot of consideration.  By increasing the deductibles on your medical insurance, car insurance, and home insurance, your monthly payment will decrease.
  • Save around the house. The little things we do can add up and make big differences!  For good ideas on little ways you can save money, read 101 Ways to Save Today, 4 Expert Tips to Save on Air Conditioning, and 20 Tips for Reusing Items.

Step Three:  Bring in extra money

  • Lower your deductions. Update your W-4 and lower your deductions so that less money will be taken out of each paycheck. It is a good idea to consult with an accountant before making the change because if you lower your deductions too much you will end up owing money at the end of the year.  There is nothing better than getting your refund check each year, but let’s be real.  How many of us put that money into savings?  Set up your deductions so you come out even at the end of the year; you don’t owe money, but you don’t get a refund either.  After you change your deductions, faithfully put the extra money you get each pay day into your savings account.
  • Have a yard sale. This is a fast and easy way to make extra money.  For tips on making money at yard sales, read Yard Sale Ideas, and How to Make $1000.00 at Your Next Yard Sale.
  • Sell on eBay. More than likely you will make more money if you sell on eBay than if you have a yard sale, but selling on eBay is more work.  The nice thing about selling on eBay is getting paid with Paypal.  Think of your Paypal account as a savings account and don’t touch the money in there.  When you are done selling on eBay, transfer the money from your Paypal account into your bank account.  You can then transfer it into your savings account.
  • Take on extra work. See if you can get more hours at work, or even take on a second job.  See our Work at Home section for our ever-growing list of ideas.

Set aside any anxiety you may have by your lack of a savings account, and do whatever it takes to build it up.  Remember, it is only temporary – once you have your emergency savings in place you can go back to your old way of spending.  Or maybe you’ll find that frugal living isn’t so bad after all!


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Category: Finances, Frugal Articles

Comments (8)

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  1. 1

    […] and encouraging articles. Name: Email: We respect your email privacy … … Link: How to Save 6 Months of Living Expenses : Frugal Mom ← Great Ways To Save Money On Your […]

  2. 2
    Cia Dreves says:

    GREAT article. I’m dealing with emergency preparedness and will post a link. Thank you!

  3. 3
    Lydia says:

    Great post and one everyone needs in this day and age. I think one area that people can really cut back on is entertainment. You mentioned hulu and youtube for TV and movies- we love it. We have been TV/cable free for 5 years now. We get nothing but static on our TV and we wouldn’t change it! Another way to save is on books and movie purchases and rentals. We use and its sister sites for DVDs and CDs. We have saved over $500 this past year from using these sites to share our books and movies with others and get new-to-us ones in return.

  4. 4

    Thanks for the awesome article! Right now we have 3 months of expenses saved, but hopefully these tips will give me the extra help i need to get to six.

  5. 5
    BrittanyS says:

    Yes what a great article. I cut cable and it was so much easier than I thought. I am following a lot of this tips and am constantly trying to lower my monthly bills. Next I cut our cell phone bills in half by switching to Straight Talk. Their $30 plan has plenty of minutes and texts for me (1000) and I am not under contract so I can switch anytime. The phones are regular phones but less expensive but still the same brands (I have an LG). Next we are trying to use cash for our purchases – that will be hard! Thanks again for the tips 🙂

  6. 6

    […] only thing on Candace’s list that could be a stretch for me is getting rid of cable and opting instead to visit a friend to […]

  7. 7

    having an emergency fund is an excellent idea.

  8. 8
    Rick R says:

    Cancel your cable and go to a bar to watch a football game. I think you’ll pay more on food/drink each visit to the bar as opposed to watching the game at home. Don’t get me wrong, we cancel our cable every summer, but I don’t think going to the bar to watch football would save any money.