Ramit Sethi: 5 Steps To Build a 12-Month Emergency Fund Fast
Building an emergency fund doesn't have to take years. If you don't currently have one, or the one you have isn't sufficiently funded, personal finance expert Ramit Sethi has some advice to help you change that.
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In April, he posted several steps on X to quickly build a 12-month emergency fund. Here's a look at five of those steps, which can allow you to have the security of an emergency fund much faster than you might imagine.
Sethi recommended eliminating as much non-essential spending as possible, and doing so fast to redirect this money where it's needed most right now — i.e., your emergency fund.
A few suggestions to do this include reducing energy costs, finding ways to reduce impulse purchases, negotiating rates with service providers, buying secondhand, seeking out free entertainment, looking for sales, canceling unused subscriptions, cooking at home, shopping your insurance coverage and taking on an accountability buddy, according to Fidelity.
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Whether you're planning to buy a new car, renovate your home or move, Sethi said now isn't the time to do so.
'I would avoid major new expenses, which always come with phantom costs,' he posted.
In March, the average cost of a new vehicle was $47,462, according to Kelley Blue Book. Also pricey, the average cost of a local move is $1,250, rising to a range of $1,123 to $14,104 for a long-distance move, according to Moving.com.
Clearly, putting a major purchase off for a year or two can fast-track your emergency fund savings.
It might not be easy, or even possible, to completely avoid some of your standard expenses. However, Sethi advised finding creative ways to save money on these necessities.
For example, he said extending personal care timetables by a month can save you hundreds of dollars per year. This adds up, as the average cost of a haircut is $35 to $150 (or more), and an additional $65 to $200 for highlights, according to Thumbtack.
Wanting to pay off all of your debts is admirable. However, if you don't have a 12-month emergency fund, Sethi said to consider stopping the extra payments on high-interest debt right now and putting that money toward savings.
Another thing to ponder, paying off a loan early could temporarily lower your credit score. Depending on the terms of your loan, you might also face prepayment penalties.
Typically, personal finance experts don't recommend saving less for retirement. Serving as an exception to this rule, Sethi said it can make sense if you're in a particularly precarious situation — i.e., a single-income family where you wouldn't have enough saved to cover expenses if you were laid off.
Do note, he didn't advise temporarily halting retirement contributions altogether. Instead, he recommended saving less, but still contributing enough to get a full employer match (if your company offers this benefit).
For example, if your employer matches contributions up to 3% and you're currently saving 10%, you might lower your contribution amount to 3% for a few months. If you're earning $3,000 per paycheck, you'd (temporarily) reduce your savings from $300 per pay period to $90.
More From GOBankingRates
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Sources
Ramit Sethi (X @ramit)
Fidelity, '10 ways to cut expenses by 10%'
Kelley Blue Book, 'Kelley Blue Book Report: New-Vehicle Prices Hold Steady in March As Sales Increase Ahead of Anticipated Tariff-Driven Price Hikes'
Moving.com, 'Moving Cost Calculator for Moving Estimates'
Thumbtack, 'Hair Stylists on Thumbtack cost'
Space Coast Credit Union, 'Does Paying Off Loans Early Hurt Your Credit?'
This article originally appeared on GOBankingRates.com: Ramit Sethi: 5 Steps To Build a 12-Month Emergency Fund Fast
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On April 9, though, Trump paused his "Liberation Day" tariffs for 90 days until July 8 after Wall Street revolted over the widespread tariffs, which were expected to drive up prices and drive down economic growth in the United States. Now, the Trump administration wants countries to provide their best offer on trade negotiations by June 4, according to a Reuters report June 2. Michael Shamrell, Fidelity's vice president of thought leadership for workplace investing, said Fidelity recommends that maintaining a long-term plan is often the most appropriate strategy when investors face an uptick of volatility in the market, as has been the situation in 2025. "Factors like rapid policy changes, political uncertainty, and the impact of tariffs, along with the speed and magnitude of changes, contribute to a sense of heightened instability," the Fidelity report stated. 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At a 14.3% total retirement savings rate, Shamrell said, more people are moving closer to a recommended 401(k) savings rate of 15%. Fidelity recommends that employees aim to save at least 15% of their pretax income each year, including matching money from your employer, to help ensure that they have enough money in retirement to maintain their current lifestyle. Shamrell said the first quarter results likely benefited as some companies increased their 401(k) contributions into the plans based on profit-sharing arrangements. Beginning in 2025, the federal law called the Secure 2.0 Act also required companies with new 401(k) plans and 403(b) plans to automatically enroll eligible employees at a minimum contribution rate of 3%, but no more than 10%. The employee may opt out. Also under Secure 2.0, those enrolled in new 401(k) plans would automatically see their contributions out of their paychecks go up by 1% or so every year until they reached 10%. The employee could opt out or change the contribution rate. Both auto enrollment and auto escalation rules that began in 2025 apply to new plans established on or after Dec. 29, 2022. Employers are not required to offer 401(k) plans under Secure 2.0. More: US bond market, Brexit could foreshadow trouble for your 401(k) Other retirement trends, according to Fidelity data: Most individuals continued to contribute to their retirement savings accounts and continued to invest in the stock market. Of the 6% individuals that made a change to their allocation, 28.2% of those participants moved some of their savings into more conservative investments. Only 0.9% of 401(k) participants stopped contributing at all to a 401(k) plan in the first quarter. More than 66% of 401(k) participants used a target date fund or managed account, which offers a mix of assets. Target date funds provide an asset mix that reflects an individual's age and their expected or targeted year of retirement. Managed accounts are more personalized and also consider an individual's goals and risk tolerance. More: Stock market meltdown driven by tariff chaos hits 401(k) investors hard for 3rd day More: Trump tariffs tank stocks, 401(k)s, as market digests massive shift in economic policy Overall, 401(k) savers and investors have been resilient, according to Melissa Joy, president of Pearl Planning, a wealth adviser in Dexter. Many investors who maintained their overall allocation saw their portfolios start to return to positive territory by early May, she said. "We were seeing accounts just north of positive — up 2% to 4% at the end of the first quarter. Then, liberation day made everything topsy turvy in early April with deep but in many cases temporary drawdowns," she said. She acknowledged, though, that it is becoming difficult for some investors to separate their political outlook from their investment perspective. "But, all-in-all, our clients maintained their allocations and investment strategy through the volatility we've seen so far this year," Joy said. Uncertainty, of course, remains among the most popular words used by CEOs and other business leaders in 2025. We don't know what's next for Wall Street, trade talks, or the overall economy — and that isn't making it easy to save for retirement in 2025. Contact personal finance columnist Susan Tompor: stompor@ Follow her on X @tompor. This article originally appeared on USA TODAY: Fidelity: fewer 401(k) millionaires minted in Q1 as markets churned Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
