Emergency savings: Not an option
Life throws us unexpected curve balls (I know from plenty of experience). Having emergency savings is crucial, because it allows you to cover life’s surprises without breaking your budget, draining your savings or going into debt. Learn how much you need, how to start building your funds, where to find the extra cash and more.
Saving for an emergency isn’t really the fun type of saving — like, say, saving up for a big purchase or vacation — which is partly why people just aren’t doing it.
Another big reason people ignore it is because they simply don’t realize how damaging an unexpected expense can be until it’s too late.
But it’s time to wake up, because $#*! happens — and when you think about it, not preparing for it is just dumb.
It’s a lot easier to think, “it won’t happen to me”… until it does, and you can be sure that something will happen. Hopefully it’s not too serious, but life is unpredictable and one thing you can predict is that some type of unexpected expense is going to come up.
In fact, according to a recent survey, more than 40% of Americans either experienced a major unexpected expense over the past 12 months or had an immediate family member who did.
And there’s one very easy way to minimize the damage — prepare for it.
Even when you aren’t making much money, there are always ways to cut back, and by building a buffer between you and life’s unexpected financial shocks, you can protect yourself from potentially losing everything.
The alarming data
According to a survey by Bankrate, only 40% of Americans have savings they can rely on in an emergency. That’s a scary number! Plus, the percentage of people who have enough money saved to cover six months worth of expenses is also at the lowest level in six years.
Another survey found that almost two in three Americans, including 46% of the highest-income households, don’t have enough savings to pay for a $500 car repair or a $1,000 emergency room bill.
And for many, it’s not that they aren’t making enough money — 10% of people making at least $100,000 a year said they have no money that they think of as savings.
A lot of people who participated in the survey even said they knew they should have emergency savings that’s easily accessible — but they don’t.
The ultimate goal of managing your money, saving and all the rest, is financial independence — being able to do the things you want to do, when you want to do them.
When you use a credit card to pay for a big expense you can’t afford (like a big car repair or medical bill), that’s a very quick way to sabotage any effort you’ve made to improve your financial life. Because when you can’t afford to pay it off, the bill continues to get higher and higher and the damage gets worse and worse.
So why aren’t people saving? There’s no easy or clear answer. Although some people know the importance, others don’t, and then there are also questions like: How much do I save? Where do I get the money? Where do I put it?
Bottom line: By not saving for an emergency, you put yourself and your family at risk — not only could it cause you to go into serious, sometimes detrimental, debt, but it could also damage every aspect your financial life, and your life in general, for years or even decades.
The idea here isn’t to scare you, but to emphasize just how important saving for an emergency is for your life now and down the road.
And I’m going to help you get there!