How to Build Your Emergency Fund as a Homeowner

By: , Contributor

Published on: Jan 02, 2020

It can be tough to build cash reserves while keeping up with homeownership costs. Here's how to make it happen.

Regardless of whether you rent a home or own one, having emergency savings is crucial. Without that safety net, you risk a host of negative financial consequences when unplanned bills pop up that you can't pay.

But having an emergency fund is especially important for property owners. When you own a home, a lot can go wrong, unfortunately, and if you don't have cash reserves to cover things like sudden repairs or unexpected maintenance, you'll run the risk of racking up debt. Worse yet, if you lose your job and the income that goes with it, you'll risk losing your home to foreclosure if you don't have the money to keep making your mortgage payments while you look for work.

As such, it pays to have a solid emergency fund before you buy a home -- ideally, one with enough money to cover three to six months of living expenses. But if that ship has sailed, and you're currently a homeowner without much savings, here are a few things you can do to boost your cash reserves.

1. Get on a tight budget

The stricter you are with discretionary spending, the easier it'll be to build emergency savings quickly. Take a look at your monthly budget, or set one up if you don't already have one in place, and identify those bills that are optional expenses as opposed to absolute necessities.

For example, you can't live without heat or running water, but you technically don't need cable if it costs a lot and you don't use it all that often. The same holds true for things like dining out, leisure activities, and gym memberships. They may be nice to have, but if you're lacking an emergency fund, cutting those expenses for a number of months could be your ticket to building one.

2. Boost your income with a second job

Chances are, you can only cut back on so many expenses in your budget. Every little bit helps, but if you're really sitting on little to no savings, you may need an income boost to build an emergency fund quickly. That's when it pays to get a second job. The money you earn there won't be earmarked for existing bills, so you'll have the option to bank all of your extra earned cash (minus what you owe the IRS in taxes, of course).

Keep in mind that getting a side gig doesn't have to mean signing up to wait tables, field customer service complaints at a call center, or work a cash register at a local shop. Your other options might include:

  • Doing something creative, like writing or web design
  • Signing up to drive for a rideshare service
  • Walking dogs
  • Teaching an instrument you play or a skill you have
  • Babysitting

3. Bank your windfalls

You may come into extra money during the year outside of your regular paycheck -- think tax refunds, bonuses or commissions at work, or generous cash gifts from relatives to celebrate your birthday. While it may be tempting to spend that money on something nice that you couldn't have otherwise afforded, sticking that money directly into the bank instead is a good way to make progress on your emergency fund.

4. Monetize your home

If you're willing to inconvenience yourself or give up some living space, you might manage to turn your home into an income stream and use that money to build emergency savings. If you have a finished basement with its own bathroom and kitchen or kitchenette, you can look into renting it out for a year. And if you have a large driveway and live someplace where parking is tough, you can see about renting out a parking spot.

You can also put your home up for rent during periods when you're out of town. If you live near a beach, ski resort, or other attraction, you could earn a nice chunk of cash for allowing short-term renters to take up residence in your home for a week here and there or over the occasional weekend.

Having emergency savings is crucial when you own a home. If you don't have at least three months of essential living costs tucked away in a savings account, make building that safety net your highest priority.

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