Can You Handle A $400 Emergency?

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Can you handle a $400 emergency? A new report shows most can’t. Here are simple tips to build a small emergency fund to have peace of mind.

When I was paying off debt, and even for a short time after becoming debt free I was living on the edge. If a true emergency came about I was scrambling. I’d need to replace something on the car or repair something in my apartment; you fill in the blank and I instantly became nervous.

I’d have cold sweats. I couldn’t focus. I couldn’t sleep. This went on for years and I hated it.

Whatever the emotion, it all came back to one thing – I had no ability to handle an emergency.

The result?

Any time the slightest thing came up I was forced to scramble to find ways to pay for the given event as I had no emergency fund. The sad thing is that the amount I needed to avoid all this emotional discomfort was usually relatively small in nature. Yet I still couldn’t handle it.

When Would You Need to Sell Something?


That’s the question posed by the Federal Reserve. The Federal Reserve found that 52 percent of individuals would need to either sell something, or borrow money to meet an emergency of $400.

Think about that amount for a minute. $400. Now think about the myriad of things that could happen to create a situation where you need access to $400.

Here are just a few things we’ve spent at least $400 on over the course of the past year and had to access one of our emergency funds for:

  • Repair/maintenance work on both of our cars
  • Work on our air conditioner
  • Medical bills (these came out of our HSA, but still view it in a similar fashion)
  • Replacing Mrs. Frugal Rules’ old computer
  • Last minute travel due to the loss of a family member

As you can see, none of them are really glamorous, and aside from the computer, were all needs that can happen at any point – to anyone.

The computer, to be honest, was a business expense, but something we had to save for regardless. I shudder to think of the fact that in previous years I used credit cards to finance such an emergency, keeping myself chained to the payment mentality of financing a solution rather than dealing with the larger underlying issue of my limited financial literacy.

We Have to Look Past Tomorrow


To be fair, there are times where there is a justifiable reason why someone might not be able to handle an emergency. That’s a different topic altogether worthy of discussion.

The underlying issue is the inability or unwillingness to look past tomorrow. I was guilty of this in my free spending days. I lived in the moment, or so I told myself, and didn’t realize I was only harming myself.

I saw an emergency fund as a fool’s errand, and then wondered why I was always scrimping by with no money in my savings account to handle any kind of emergency. Sadly, far too many are stuck in a similar mindset and are unable to see the effect and figure out the cause.

How Can You Build Up A Cushion?


This is one of the biggest questions I hear from readers – how can I build up some sort of savings to be able to handle an emergency? Many experts believe you need to have between 3-6 months of living expenses in an emergency fund.

Tell that to someone who has nothing built up and see his or her reaction. They’re overwhelmed. For someone making a lower salary, the idea of coming up with at least 3-6 months of living expenses in one fell swoop is overwhelming at best and defeating at worst.

They think they need to hit that right away and that anything less is a failure. That doesn’t have to be the case. According to a survey conducted by Bankrate, a majority of Americans polled can’t fund a financial emergency of $500 from their own savings.

Since many emergencies cost around that amount, it makes sense to try to build up an emergency fund with that amount of money in it to begin. There are many ways to save up $500 to stash in an emergency fund. Below are a few:

Find one bill to cut. Whether it be a cheaper cell phone plan, grocery bill or anything else. Take the savings and throw it in a savings account each month. You can get a plan with Republic Wireless, for example, for as low as $15 per month. and save the difference.

If you don’t know what bills to cut, you can always negotiate your bills lower to get extra savings with Trim. Trim is a free to use app that works to negotiate all your monthly bills, helping you save money. They can even cancel subscriptions or memberships you don’t use to help you save more.

Find one way to make extra money. There are many ways to make extra money. You can pick up overtime at work, start a part-time job or launch a side hustle. I know…you think you don’t have the skill to have a successful side hustle.

Can you drive? Do you have a car? You can make money delivering meals for Postmates and last I checked all you need is a clean record and ability to be courteous to people.

You can even take surveys in your free time to build up extra cash. You won’t get rich quick, but they can be a good way to monetize your down time. Below are some of my favorite survey options:

Survey Junkie: One of the top survey sites and they pay cash directly to your PayPal account.

Pinecone Research: They pay $3 per survey and they pay by Amazon Gift Card or virtual Mastercard. However, if you’ve joined Pinecone in the last 30 days, your first redemption must be by bank transfer to verify your rewards account.

Opinion Outpost: One of the top survey sites in the space and they have quarterly $10,000 prize drawings.

InboxDollars: Earn money for taking surveys, watching TV or making purchases online. Get $5 just for signing up.

Get a roommate. Seriously, get a roommate and split the rent or mortgage payment. Take the savings and throw it in a savings account.

Start saving. I know you may feel you can’t save money. I don’t care if it’s $20 per month. After five months you’ll have $100 to fall back on. Start there and build from that. Create momentum and use each $100 level saved as a challenge to save more.

Just make sure to find a bank that lets you you open an account with no minimum balance. Chime has no minimum requirement and rounds up each purchase to the nearest dollar, putting the funds in a savings account.


Can you handle a $400 emergency? A new report shows most can’t. Here are simple tips to build a small emergency fund to have peace of mind.

These are just a few simple ways to begin to build up a cushion to fall back on. There are many other ways, but the key is to pick a way and start. Take that first step and follow with a second one. You’ll be amazed at what kind of momentum you can create with a single step.

Not to mention the fact of the freedom to sleep well at night because you’re not worried about how you’re going to pay for that $500 car repair.


Additional resource: If you’re looking for a simple way to stay on top of all your finances , then check out my favorite tool – Personal Capital. Completely free, it allows you to track your spending, monitor your bank accounts, set payment reminders and watch your net worth grow plus many other tools. We use it in our home to stay on top of our budget.

Open a free Personal Capital account today!


What kind of an emergency can you handle financially? What’s another way you’d suggest to help build up a safety net of $500 or more? What’s something you’ve had to access your emergency fund for recently only to be thankful you had the money?

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John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.

Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.

Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.


  • JC @ Passive-Income-Pursuit says:

    Due to lots of medical expenses in 2015 our emergency fund is drastically reduced and I don’t like it at all. We’re putting investing on hold until we can build it back up because 2016 is going to be a big year of changes for my wife and I.

    I think you hit the nail on the head with the conventional advice of 3-6 months being overwhelming for some. If you’re currently spending at or above your means and have no savings 3-6 months of expenses in cash seems impossible. But you have to start somewhere. Even if it’s $20 a month that will add up over time and as momentum builds your enthusiasm should as well which will lead you to look for other ways to try and boost up that monthly savings.

    • John Schmoll says:

      Sorry to hear that JC, though thankfully you had the funds needed to take care of things. Completely understood as to why you’d pull back on investing this year to replenish it to the level you want.

      Yep, I think too many let that overwhelming feeling hold them back from starting. We all have to start somewhere and if it’s at $20/month then it’ll add up over time.

  • Thias @It Pays Dividends says:

    We have enough expenses to last us about 5-6 months if something were to happen. My wife stays home full-time with our daughter so I wanted to make sure we had a solid amount set aside in case something were to happen to my position and our one current income. I don’t care if this money isn’t invested and might be losing purchasing power due to inflation. I see it as financial security and it helps me sleep easier at night.

    You don’t need to save it up all at once. This amount took years of savings to get to and we started out at saving $20 a paycheck and soon were able to bump it up over time. Start small or start large, the important thing is to start.

    • John Schmoll says:

      That’s awesome Thias! Being self-employed, we’re very much the same way. It ends up being a chunk of money, but it helps us sleep at night.

  • Jordan says:

    I feel very blessed that I’ve never had to dip into my emergency fund, but knowing it’s there brings me so much comfort because it’s so true that an emergency expense can come up at anytime. Your roof could start leaking in tomorrow’s rainstorm or you could end up in the emergency room and max out your insurance in no time. These things could cost you well over $400. That’s why I would say saving 3-6 months of living expenses is so important. Start little because it can be overwhelming, but make it a priority today!!

  • Jaime says:

    Sure I can handle a $400 emergency, but probably not a $4,000 so I’m working on building up my emergency fund.

  • Natalie @ Financegirl says:

    This is so important! I have a sufficient emergency fund and I think it’s one of the first things people need to do to feel better about their finances. You have to be able to handle an emergency (and using a credit card doesn’t count)!

  • Holly@ClubThrifty says:

    I went without an emergency fund in my early 20s. Looking back, I don’t know how I slept at night!

  • Tonya@Budget and the Beach says:

    I never want to be in a position where I can’t scramble to find $400 anymore. NEVER! I do not want to be a statistic. It’s really incredible the amount of people who are not saving a dime. It seems everyone around me does pretty well, but looks I guess are deceiving!

    • John Schmoll says:

      They definitely can be Tonya. I’ve met too many people that look like they’re doing ok but they have no safety net.

  • Emily @ JohnJaneDoe says:

    It’s been a while since I didn’t keep an emergency fund of some sort. To build the fund initially, I moved in with my mom and sold a bunch of games/CDs/books. Sometimes selling stuff is the jumpstart you need to start building your savings.

    I also enrolled in one of those “keep the change” programs, where they rounded up all of the purchases from my debit card and put it in my savings account.

    • John Schmoll says:

      Those are all great ideas to get started Emily! We still sell stuff from time to time and the money often goes in our EF.

  • Brian@Luke1428 says:

    A $400 emergency is nothing. You can have one of those in a heartbeat. No matter how often I hear these type of statistics it still amazes me how many people are not financially prepared for something this basic. I don’t see how you can ever move ahead without having a basic emergency savings fund. It’s the #1 step you should take to get right with your finances. I’m glad we have one…it’s saved us time and time again.

  • Kim@Eyesonthedollar says:

    I feel like we have way too many $400 emergencies, but we’ve put ourselves in that position with several rentals! I do feel that we could withstand just about any financial emergency for 6-12 months. It feels really good to be able to have that peace of mind. We lived without it for way too long.

    • John Schmoll says:

      I’d imagine having rentals would increase your likelihood of them popping up. But, y’all have done the important thing and protected against it impacting you.

  • Amanda S @ Passionately Simple Life says:

    I would definitely be able to handle a small emergency like that now, but a couple of months ago that was a completely different story. Almost all of my emergency fund had been depleted due to one thing after another. It was hard at first being in the midst of it all but it taught me why having that money set aside was truly necessary.

    • John Schmoll says:

      Well, sorry to hear that Amanda but definitely glad you had the funds available to get you through that time. You hate to use it, but thankful you have it. 🙂

  • Jason B says:

    I used to be one of those people that couldn’t handle a $400 emergency. I actively started saving and finally started saving. I’m still in the process of adding more to emergency account.

  • Catherine says:

    There was a time when we couldn’t handle a $400 ER but thankfully those days are far behind us. We’re aggressively paying debt off so don’t have a huge cushion but if the shit hit the fan tomorrow, we could probably handle about $2,000. Our ER fund is never less than $1000 (about $1500 now) but because we put so much extra towards debt every month we could easily find $500-1000 more in any given month if we needed.

    • John Schmoll says:

      I remember being in those days as well and glad they’re behind me. Totally understood why you’re keeping it at the level you are now – it’s going to feel great when that debt is killed! 🙂

  • DC @ Young Adult Money says:

    I tweeted about this statistic a few days ago and I think it really highlights what a huge part of our society lives paycheck to paycheck. There’s a lot of reasons for it and I think there are some forces (i.e. lack of education, poverty, student loans) that play into it. I don’t think there is one solution that will solve the problem.

    • John Schmoll says:

      I would tend to agree, to a certain extent, DC. I absolutely believe there are those who face factors like poverty, lack of education, etc and those need to be dealt with. However, I know there are many others in this situation simply because they overspend – even with a “good” salary.

  • Shannon @ Financially Blonde says:

    This is why the number one goal I give my clients is to build up their emergency funds. Yes, if you have debts it sucks to pay interest or have them out there, but if you don’t have the cash saved up, then you end up paying more in debts because you didn’t have the cash for the emergency.

  • BeachMama says:

    Luckily, we are able to handle a $400.00 emergency…the almost 6K hospital bill after my husband’s heart attack – not so much.

  • Alyssa says:

    For the first time in my life, I read this title and was relieved instead of fearful. I finally have an emergency fund saved and I am so happy! Given it’s still small, it’s started, and that is more than I could have imagined just one year ago.

    Side hustles are the greatest way to increase income and add to savings accounts, but also just budgeting to pay yourself first is key if you don’t hold duplicate jobs. Simple, but effective.

    • John Schmoll says:

      That’s awesome Alyssa! The fact you have one and building it is the key takeaway.

      Yes, simple, but also very effective.

  • Mrs. SimplyFinanciallyFree says:

    I feel so fortunate that we have plenty of money in the bank if something comes up and truly can’t imagine being on the brink of financial disaster all of time time. I have always been a planner though so even if I didn’t have an emergency fund I would be squirrelling away every little bit to build it up.
    I am going to talk with my mom about switching her cell phone plan to Republic Wireless as I think it could save her money as she does need to build up her savings.

    • John Schmoll says:

      I feel the same way – there were days we weren’t in that situation and it was horrible. You should definitely talk to your Mom about making that switch – it can save big money.

  • Mark says:

    For many people it seems like expenses = income. Budget = method to make sure they spend all their money. When you free yourself from this mentality you have plenty left over each month and the things that were emergencies are covered and then some by your monthly cash flow to savings. Personally it works best for me keep my extra savings in my taxable investment account where I can always pull it out penalty free if needed for large expenses, but doesn’t tempt me to spend it like it would if it were in a bank account.

    • John Schmoll says:

      That’s an excellent point Mark. I think, so often, many just see their paycheck and see all of it as money to be spent.

  • Ken Telerik says:

    We (my wife and I) don’t have a sufficient emergency fund now and were very much the statistic from 2012-2014 the first three years of our marriage and went through a lot of financial upheavals.

    We did everything that you could think of – took money out of my 401k, borrowed from my 401K, ran up to credit cards, borrowed from my parents, etc.

    Even now our emergency fund is only $1000 but I sleep pretty well now. That’s been sufficient to handle most unexpected expenses.

    I thought about what are unexpected expenses for us.

    1. Job loss: if she lost her job we could handle things on my income. If I lost my job we would have to come up with around $4000 a month. Right now we would have to dip into the 401K. I’m in a hot field and it has never taken me longer than 30 days to change jobs.

    2. Car repairs: line of credit with the car repair place with no interest for six months. If it were something major, I could do without a car and just work from home.

    3. Medical expenses: health insurance + HSA. But you can always make payment arrangements with medical providers.

    4. Home repairs – none. We rent.

    5. Emergency trip to see relatives. Our relatives are within easy driving distance (less than 200 miles).

    Also, with enough notice – 30-45 days, we could re-arrange our retirement savings/debt payoff plan to come up with at least an extra $1000 or if I had a suspicion that my job was going through things.

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