Emergency fund
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Certified financial planners insist that you need a sufficient emergency savings fund. But when Elizabeth Buffardi recommends this personal finance must-have to clients, she speaks from experience since she’s actually had to live off her rainy-day fund.

Almost 11 years ago, she found out that in three months she wouldn’t have a job. This news made her previous financial problem — her belief that she had too much cash in her savings account and it was time to invest some of it — a good problem to have as Buffardi found herself jobless during the Great Recession.

“Everybody, you have to have an emergency fund,” Buffardi says. “It’s an absolute must.”

Buffardi’s emergency savings account helped her withstand 13 months of unemployment. While her account was nearly depleted after this period of joblessness, she didn’t incur any new debt by the time she found a new job.

Bad news, then saving at every opportunity

With her future employment uncertain, Buffardi began saving as much as possible until her last day on the job around three months later.

“I saved every single penny I could into that online savings account,” Buffardi says. “Because I thought, ‘Oh my gosh, it’s taking everybody at least six months to a year to find a job. So I don’t know how long I’ll be unemployed.’”

Looking back, Buffardi estimates she had enough in her savings account to cover nine or 10 months of expenses.  Buffardi often tells clients how her emergency fund saved her.

“Because sometimes clients are like, ‘Oh my God. One, how am I ever going to save that much money? And two, (that’s) a lot of money to be sitting in cash,’” Buffardi says.

That’s when Buffardi retells her tale to reinforce the importance of having a financial backstop.

“I always tell them my story, to say, ‘Look, this really worked out really well for me. And there’s been multiple times when having that emergency fund has really been a savior,’” Buffardi says. “And, so sometimes, when they hear my story, it makes it more relatable and therefore it’s a little easier for them to get on board with having that emergency fund.”

Rebuilding after an emergency

Her emergency fund had been there for Buffardi while she was unemployed. Once employed again, it was bittersweet for Buffardi to have to rebuild her savings. On one hand, Buffardi looked forward to being aggressive to restore the fund to its pre-unemployment level. But she also felt the sting of not being able to spend freely all over again.

“There was another part of me that was like, ‘…But I finally have some money. Like I want to go out and live my life and have fun and do cool things. Spend some cash,’” Buffardi says. “It was hard to be that disciplined still because I finally had a job again, where I had some income. But I was sort of like, ‘… What if I get laid off again?’”

With the job market unstable and the unemployment rate still high in the aftermath of the Great Recession, Buffardi knew that her job security wasn’t guaranteed.

Buffardi, a member of the Alliance of Comprehensive Planners, says she got a new job in October 2009 and by January 2010 finally got to the point of actively rebuilding her emergency fund. Prior to that, she might deposit some money into savings and then need it to pay bills. By January 2010, however, that money stayed in savings. Since 2014, Buffardi has been a full-time certified financial planner at Crescendo Financial Planners in Oak Brook, Illinois.

The savings rebuilding process was a little easier since Buffardi kept her investments intact.

How to start and build an emergency fund

1. Make a budget to track where your money is going each month.

2. Start with a small amount of savings in a high-yield account each month, earmarked for your emergency fund.

3. Utilize a split deposit to have some of your paycheck automatically put in an emergency fund.

4. Try to increase this small amount whenever possible.

5. If you receive a bonus, raise or any type of extra money, consider adding this or a percentage of this to your emergency fund.

6. Aim for at least enough to cover three to six months’ worth of emergency expenses.

If you don’t have a fund, now is the time to get started. Nearly three in 10 people don’t have an emergency fund, according to Bankrate’s latest Financial Security Index.

Buffardi weathered a long period of unemployment because she was prepared.

“I was able to figure this all out, do it all on my own,” Buffardi says. “I never had to ask anybody for money. I never ran up my credit cards. And I never had to dip into all my investments.”

Adds Buffardi: “So to me, that’s the biggest win of it all, that I got through this basically with just the cash that I had on hand.”

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