The Weekend Leader - How to Create an Emergency Fund and Live Smart

7 Simple Steps to Create an Emergency Fund and Live Smart

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Priyanka Mashelkar   |  

14-January-2022

Vol 13 | Issue 2

Your car has broken down, people are being fired over Zoom calls, and your cat needs emergency surgery.

But when you are already living paycheck-to-paycheck, how can you afford all these arbitrary expenses? By putting them on your credit card and hoping for a miracle to manifest by the time you have to pay it off?

You may consider it, only if you’re one of the naïve ones. But if you are smart, you might dip into your emergency fund.

Make efforts to create a separate fund for your emergency use, says the author (Photos for representational purpose only)


An emergency fund is nothing but money that has been kept aside specifically for such contingencies.

If you don’t have an emergency fund already, you may want to build one now – starting today.

I know it is next to impossible to afford a lump-sum amount to be put aside unless you win a lottery, which is why I have brought you, 7 ways of slowly building up an emergency fund and living a smart life:

1. Try a no-spend month

For a month, and only a month, spend only on your needs, and not on your wants. This means that you only spend on keeping yourself (and your family) fed, clothed, and sheltered.

Anything else is optional, and this month, you’re going to select the ‘no’ option to your ‘wants’. You can buy it next month, but chances are, once you suppress the initial urge to shop, the desire to do so after waiting an entire month, pretty much dies a quick death.

And what do you do with the extra money? Put it aside in a completely different bank account. This will be your emergency fund. Don’t ‘try’ and keep it in the account you use regularly, because you will only succeed at trying and not get anywhere beyond that.

2 Plan your meals:

One of our biggest expenses, apart from housing and transportation, is food. I’m not telling you to go hungry, far from it.

But with the advent of online food delivery apps, it has become almost stupidly easy to order in. The consequence is not just your health but also your wallet!

Instead, take a couple of hours every weekend and plan out your meals and ensure a tasty home-cooked fare. If you’re really serious about it, go ahead and prep for them too. Just ensure that you don’t order in, and put the money towards your emergency fund instead.

Plan a delicious home-cooked fare instead of ordering food from restaurant  


3 Sell some old possessions:

If you look hard enough, you can make money off most things in your house. While we only think of the usual suspects for selling, like old electronics which can be exchanged for cash easily, a bit more creativity can take you a long way.

For example, did you know that there is a community of die-hard skincare addicts, who will pay market price for skincare that you may not have used, or that you used but did not like?

Every single thing in your house that you don’t actively use can be converted to hard cash and invested to bulk up your emergency fund. You only need to look.

4 Rent out your assets:

We all own many, arguably unnecessary, objects. I don’t think any of us can confidently say that we use everything we own to the utmost degree of utilization. Think about it.

You may have old books lying about that you can’t bear to part with. What about exercise equipment? A bicycle? With the plethora of Whatsapp groups which are currently only used by Society members to complain of the ‘unbearable’ noise by the ‘kids nowadays’, you can be the ray of hope and offer to rent out things to the neighbourhood kids – a win-win for both you and the parents of the children you’ll keep busy.

5 Monetize your schedule:

Your monotonous schedule can actually be a goldmine for earning a few thousand rupees here and there. I know you’re not convinced, so let me give you examples.

If you drive to the office, can you alternate with someone who also goes to the same place? Or you can drive and they can chip in for the fuel?

If your schedule involves cooking for yourself, look out for people who would love to have that off their shoulders – after all cooking for one and cooking for two takes the same amount of time. Our daily tasks are built for scale, and even if you don’t make any money off them, you can free up your schedule from these tedious tasks.

The unused cycle lying in a corner of your house can provide you some extra income, so keep looking around for ideas


6. Leverage your skills:

Unbeknownst to you, you are actually quite skilled. Whether it is coding, or juggling tasks, or even growing plants, the skills you have are the skills someone wants – and that someone will pay for. It is only a matter of being creative and thinking out of the box. Find out the skill that you possess, which can earn you those extra bucks.

7. Force your hand:

If everything else fails, force your own hand. Set up a standing instruction for 10% of your salary to be automatically taken out and deposited into your emergency fund, the day it is credited. Then, you have no option but to reduce your spending to get through the month – and ta-da! Very soon, you have your own emergency fund.

No matter how many ways I list out, there are truly only two ways to build up an emergency fund, or any other fund for that matter – cut your expenses, or find a way to earn more.

But by hook or crook, you must do it, and it is all but guaranteed that your future self will thank you for it someday when the funds come handy during an emergency.

Priyanka Mashelkar is Dy. Commissioner of Income Tax and Author, 15 Sure-shot ways to Hit the Jackpot.

More from the Author
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