Any irregular expense that you wouldn’t be able to easily cover with your free cash flow is a good candidate for a sinking fund. Sinking funds work like this: every month, you’ll save money across multiple categories to be used at a later date. The funds accumulate, sometimes in an interest bearing account and drawn only for the intended purpose. This helps you avoid situaitons where you do not have the money to replace something and must rely on consumer loans with their high interest to be able to pay for it.

To begin with, you can cut your everyday expenses and set aside the cash you save this way for your emergency fund. Simple approaches that will enable you chop down your everyday expenses are limiting the number of times you eat outside, buying groceries in bulk, using AC only when absolutely required and cutting down luxurious costs. An effective way to increase your emergency fund is to increase your income. You could begin a side hustle, work overtime, and work on weekends to earn extra money. This will enable your rainy day account to grow rapidly.