We live in one of the most prosperous nations in the world, but many of us are living on the financial edge, surviving paycheck to paycheck. As the latest proof, consider this fact: According to a recent BankRate survey, 63% of Americans do not have the cash on hand to pay for a $500 to $1000 financial emergency.
Even a higher family income does not guarantee adequate emergency savings as only 62% of households making over $75,000 a year indicated that they would have enough cash to cover a financial bump in the road.
“A solid majority of Americans say they have a household budget, which is a good thing. But too few have the ability to cover expenses outside their budget without going into debt or turning to family and friends for help,” explains Claes Bell, CFA, Bankrate.com banking analyst.
We’d all like to think we’re immune from a financial crisis, but unfortunately emergencies come up more frequently than we’d ever imagine. According to a BankRate survey, last year 40% of respondents incurred an unexpected major expense. A broken washing machine, unexpected emergency room visit, or unplanned for insurance deductible can sabotage anyone.
That’s why creating an emergency fund must be your first financial priority, even if your finances are tight.
Think Small
You don’t have to create your emergency fund overnight. Remember, by saving just $2.75 a day you’ll have amassed a $1000 emergency fund by the end of the year. Cut the daily coffee, dine out one fewer time a week, or ditch your smoking habit, and you’ll have an emergency cushion built in no time.
Sell Your Stuff
We’re literally drowning in junk. But as the saying goes, one man’s junk is another man’s treasure. Use eBay, Craig’s List, Amazon, garage sales, or consignment shops to sell the stuff you no longer need. In no time flat you’ll have at least $1000 saved toward your emergency fund.
Save The Windfalls
A quick and easy way to build an emergency fund is to save all your financial windfalls. Direct your raise or year end bonus to your emergency fund. Do the same with your income tax refund.
Cut The Fat
We waste more money than we’ll ever know. Perform a spring cleaning of your finances.
- Do you really need all those cable channels?
- Are you really using your gym membership?
- Could you save in fees by moving from a conventional bank to a credit union?
Seal the money leaks in your life and contribute the savings to your emergency fund.
Financial emergencies will strike. It’s up to you whether or not you’ll be prepared.
BMWK, how do you find the money to create an emergency fund?