Emergencies are going to happen, it’s inevitable. So if you know the storm is coming, why wouldn’t you want to be prepared for it? Without any kind of savings set aside, emergencies will leave you stressed out and frustrated. Without an Emergency Fund, you’re forced to either charge the expenses to a credit card or borrow from a friend or family member. In either situation, you will be stressed about having to pay back what you borrowed during and even after the emergency situation has passed.

Unfortunately only 40% of Americans would be able to pay for a $1,000 Emergency with cash savings, according to Bankrate. But it doesn’t have to be this way. You can get prepared for emergencies and you can get your finances under control, regardless of how you’ve been living before. Saving for an Emergency Fund teaches you to make saving a priority so that you can be prepared for both emergencies and for your future without having to go into debt to stay afloat.

A Fully Funded Emergency Fund consists of 3-6 months of expenses. Having this will ease your financial stress level because you know even in an emergency, you have 3-6 months to deal with the emergency or come up with a new plan if the emergency involves something like losing a job. But, if you’re standing at the bottom of a mountain of debt, you’re hands are likely too full to be able to set aside 3-6 months worth of expenses. So if you’re just starting on the journey to financial freedom and need to pay off debt, we’re going to start with saving a Starter Emergency Fund of $1,000 and for Dave Ramsey followers, that’s Baby Step #1.

Related: How to Reduce Money Stress

The Starter Emergency Fund

For a Starter Emergency Fund, you want to save $1,000. Most emergencies that you are going to encounter will be less than $1,000 and we don’t want to postpone debt payoff for too long by trying to save a larger emergency fund. This is a great starter fund because it’s a small, manageable amount that won’t take long to save. To quickly save $1,000 you can take action and either increase your income or cut your expenses. Some people may even already have the money in a savings account so they can check the box and move on. The point is to focus and save the money as quickly as you can.

This will build momentum and get the ball rolling for debt pay off. If you can save $1,000 easily for your Emergency Fund, then you can start to look at your debt in chunks of $1,000 and start paying it off one chunk at a time. Dave Ramsey’s Baby Steps start with the $1,000 Starter Emergency Fund as Baby Step #1 because it gives you a quick win that makes you realize you can do this and you can move forward to paying off all your debt. In addition to that, the Emergency Fund is going to act as a safety net while you go through the process of paying off debt so that minor emergencies don’t cause you to go back in to debt. If you’re ready to start making decisions for financial freedom, then the first decision is to never go back to debt again (ever). The Starter Emergency Fund is the first step in making that happen.

What to do When You Have The Emergency Fund

Once you have the $1,000 Emergency Fund saved, there are a few things you need to do to make sure it stays safely tucked away for true emergencies. First of all, you need to place it in a separate savings account rather than leaving it sitting in your checking account where you may be tempted to spend it. Secondly, you need to discuss with your spouse or accountability partner what qualifies as a true emergency and what does not. For example, emergencies include things like surprise car repairs, broken appliances, or unexpected doctors visits, etc. Non-emergencies include things like a sale at your favorite store, eating out because you had a bad day, or Christmas (because it’s not a surprise!). Christmas and similar categories should be saved for all year long and go in a sinking fund so you are prepared to pay cash when the time rolls around.

Thirdly, you need to include the Emergency Fund in your budget so that whenever a true emergency happens, you can immediately track the expense as coming out of that fund. Whenever you have to dip into the Emergency Fund, your very next priority needs to be reimbursing it back to the $1,000 threshold as soon as possible. That means you stop debt payoff and or cut some expenses so you can get the Emergency Fund back where it should be, quickly.

If you’re ready to get started saving your $1,000 Emergency Fund to kick start your financial freedom journey, I’ve created a printable Emergency Fund Tracker for you! To download the tracker, just sign up below for my newsletter so you will receive even more tips and encouragement for your personal finances. After signing up, you will immediately be able to download and print the tracker.