I want to build 6 months of emergency fund. what is the best way to go about it?
It is actually not rocket science, so relax! With patience, consistency and the right plan, it is absolutely doable. The trick is to start small, stay disciplined and build momentum over time.
Here is a simple 5-step approach that I followed. I am sure it will also help you get there:
- Set smaller goals first: Do not aim for the full 6 months straight away. Start with one month of expenses, then move to 3 and gradually reach 6. Hitting small milestones will keep you motivated.
- Save small, save often: Begin with whatever amount feels manageable. Even ₹500 or ₹1,000 a week is fine. The key is to make saving a habit, not a burden.
- Automate your savings: Set up an auto-transfer to a separate savings account each month. When the money moves automatically, you will be less tempted to spend it.
- Avoid lifestyle inflation: As your income grows, resist the urge to spend more. Instead, increase your monthly savings contribution.
- Balance saving and debt: If you have high-interest loans, build a smaller fund first, say, 2–3 months. Then focus on clearing debt before completing your 6-month goal.
Use an emergency fund calculator to estimate your exact target. For example, ₹60,000 per month in expenses means a ₹3.6 lakh fund for 6 months.
With steady effort, your safety cushion will be ready before you know it.