The Easiest Way To Create an Emergency Fund (Without Touching Your Paycheck)

Creating an emergency fund has a ton of benefits, most of which you’ve probably heard before… it reduces the amount of money you have to put on credit when you get hit with a big bill for an unexpected expense, it’s there in case you’re suddenly out of work, it gives you peace of mind... the list goes on. (I’ll link some articles to why you need an emergency fund here, here, and here.) But, when you’re living pretty paycheck to paycheck and have very little money to spare, how do you find money to put into savings? 

It’s actually pretty simple… save ALL of your windfall money. What’s windfall money? Large chunks of money that aren’t part of your normal paychecks or budget. That includes bonuses, tax refunds, money from a side hustle, money from a garage sale or things you’ve sold online, gifts, etc. It’s basically money you weren’t expecting to have and hasn’t been previously allocated to other expenses.

One of our commercial lenders, Shawn Dunham, saves the 2 extra "windfall" paychecks he gets each year. He explains, “One way we have always saved is ‘the 2 free checks a year’. I mean, they aren’t technically free because you worked for them, but let me explain… There are 52 weeks a year. Most people are paid every two weeks. Well, if you only got 2 paychecks a month for the entire year that would only equal 48 weeks’ worth of work. This leaves 4 weeks (2 paychecks) not allocated to bills/budget (since most bills are paid monthly). So as long as you budget out on a monthly basis, you end up with two ‘unspoken for’ paychecks during the year to put towards savings.” 

This approach may not work for everyone, depending on how your pay periods are structured and how your budget works. However, for those who have the opportunity, it’s a great way to save a month’s pay in a year’s time without having to do any additional saving.

By being consistent and saving all of your windfall money throughout the year, you’ll be surprised at how much of an emergency fund you can accumulate without having to allocate money from each paycheck.