How to Build an Emergency Fund — Even While in Debt

Building an emergency fund when you’re already struggling financially might feel impossible. I’ve been there.

In my twenties to early thirties, I was working long hours — sometimes burning the midnight oil and over weekends just to keep up with my job deliverables. The stress wore me down. Eventually, my health gave out. I ended up in and out of hospitals, also undergoing several surgeries that left me physically drained and drowning in medical debt. I had to step away from full-time work, and when I could, I picked up odd jobs — delivering food, freelancing, anything to stay afloat. There were nights I’d come home from a delivery shift, trying to recover, aching and exhausted, only to face another medical bill in the mail. Saving money felt laughable. I was just trying to survive.

It’s easy to tell someone to “save for emergencies,” but much harder when you're barely making ends meet. It took me five long years to recover — to rebuild my health and work, regain control of my finances, and finally, start saving again. Today, I’m not completely out of debt, but I’m in a much better place, and well on my way to achieving financial independence.

Here’s what I’ve learned about building an emergency fund, even when you’re deep in debt:

1. Make Every Dollar Count

When money is tight, every dollar is powerful. Don’t underestimate small amounts — they add up. Start setting aside whatever you can. If possible, put that money into investments that generate returns. Reinvest any dividends you earn. The magic of compounding works best when you start early, even with tiny amounts.

2. Live Within Your Means

Resist the urge to keep up with others. Skip the luxury goods and avoid taking on lifestyle expenses that don’t serve your long-term goals. Only take on necessary debt — for example, housing. Learning to live frugally helped me accumulate small savings, which eventually turned into an emergency fund.

3. Find Alternative Income Streams

When I couldn’t work full-time, I took on whatever gigs I could find — contract work, freelancing, deliveries. It wasn’t glamorous, but it helped me stay afloat and slowly chip away at my debt. Even today, I look for ways to diversify my income. A side hustle can be your lifeline when things go south.

4. Pay Off Debt Strategically

Don’t be discouraged if you can’t clear your debts all at once. Start small. Pay off a little every month, focusing on the highest-interest loans first. Celebrate every small win. Over time, these efforts lead to progress — and eventually, to financial freedom.

5. Spend on Assets, Not Liabilities

Instead of spending on things that lose value, use your money to build assets — investments, savings plans, or even an endowment policy. These are things that grow your net worth and support your future.

6. Save Consistently — Even if It's Just a Little

Save as much of your income as you can manage each month. Even small, regular savings make a difference over time. Automate it if possible, so you don’t even have to think about it.

I’m still on the path—now with a family and a little one in tow. I’m still working through debt and steadily building toward my FIRE (Financial Independence, Retire Early) goals. It’s a work in progress, but I’ve come a long way from where I began.

If you're in a tough season right now, I hope this reminds you that progress is possible. Keep moving forward. Every small step matters—and each one brings you closer to stability, and eventually, to freedom.

You've got this.