Why Everyone Needs an Emergency Fund Right Now

An unplanned car repair. A home HVAC system that unexpectedly decides to bite the dust. A medical expense that your health plan doesn’t fully cover. Or in the most dire of circumstances, job loss.

The aforementioned are all good reasons to have some sort of an established emergency savings fund, as unanticipated expenses that range anywhere from several hundred to several thousand dollars can be difficult for many Americans to absorb. However, it may surprise you to learn that nearly 60 million Americans don’t have any kind of emergency savings fund for such rainy day situations, something that can have dire consequences should an emergency situation ever arise.

Failure to have such funds on hand may lead people to take out loans or refinance properties, which can put them further in debt or behind the ball when it comes to their financial goals.

The good news is that it’s fairly easy to build an emergency fund quickly – but it takes something that eludes many Americans when it comes to savings: commitment. Here’s a look at some tips and suggestions on how much to save and how to do it:

Emergency Funds: How Much Should I Save?

Minimally, most financial experts agree that you should aim to save about three months worth of living expenses in an emergency fund.

To calculate your living expenses, just add up all of your given bills in a month (i.e., mortgage, auto payments, utilities, groceries, phone bill, etc.). Planning to have three months of living expenses saved up is a nice cushion if you were ever to unexpectedly find yourself out of work. The nice thing about having three months of living expenses saved up is that it’s more than likely to cover any unexpected major expenses, like a significant car or home repair.

How to Save For Your Emergency Fund

Now on to the hard part: committing to saving for your emergency fund.

You have a goal to strive for in three months of living expenses, now you have to put a plan in place for how to reach it. It’s not going to happen over night, it takes work. Here’s a look at some things you should be doing to reach your goals:

Look for ways to dial back: There’s a good chance that there are some simple things you can do to cut back on your monthly expenses with little to no inconvenience, thereby giving you more to put toward an emergency fund. For instance, can you downgrade your cable plan or cell phone plan? Can you limit the streaming services you subscribe to? What about services you can live without, like a home landline or skipping the coffee shop every morning and instead making your own pot? Making minor adjustments to your lifestyle can yield big returns for your savings fund.

Put bonuses, tax returns toward it: Now, we get that it’s no fun to put 100 percent of any work bonuses or tax returns that you receive each year toward an emergency savings fund, but even putting 20 to 30 percent of it away can be a great way to boost that account while not impacting any other aspects of your life or spending habits.

Come up with a savings plan: Chances are you allocate so much of your paycheck toward a 401K or IRA fund. Perhaps you’re even allocating funds toward a college savings plan if you have young children. Take your allocations a step further and set aside even $25 or $50 per paycheck to go toward the emergency savings fund. You’ll be surprised at how quickly it adds up.

Don’t eat out as much: It’s always fun to dine out, but if you’re one of those people that regularly skips taking a lunch into the office and opts to buy out several times a week, you’re spending money that could very well be put toward your emergency savings fund. Assuming that you spent $10 on lunch three times a week, that’s $30 a week that you could be putting toward your savings, or $120 a month. Think about that.

Just because it’s worth noting again, commitment is key to meeting your emergency savings fund goals. You’ll be thanking your planning prowess and commitment when the unexpected happens and you have enough in the account to adequately cover whatever situation occurred.

Regards,

Ethan Warrick
Editor
Wealth Authority


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These content links are provided by Content.ad. Both Content.ad and the web site upon which the links are displayed may receive compensation when readers click on these links. Some of the content you are redirected to may be sponsored content. View our privacy policy here.

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