Unfortunately, according to a recent study, about 70% of Americans cannot afford a $500 unplanned expense. There are plenty reasons why people do not have money in their savings accounts such as low income, medical bills, financial mismanagement, etc. However, if at all possible, you should try to build an emergency fund so you can handle the inevitable unexpected expense.
So, What Is an Emergency Fund?
Putting money in a savings account may seem unrealistic for someone who has zero savings at the moment. The thing is, when your care breaks down, your kid gets sick, or a natural disaster damages your house and you have no savings, you have to use money for things like credit card bills and the mortgage payment to pay for the emergency. This can lead to a serious debt snowball.
How to Build a $1,000 Emergency Fund
Of course, there are different types and sizes of emergency funds to consider. It is widely accepted that everyone should try to build a $1,000 emergency fund. This is considered the minimum. Maybe saving this money, even gradually, is unrealistic. Here are some ideas on how to find the $1,000:
Have a garage sale – look around at all of the things you never use or don’t need and then imagine them as little piles of money. It is not always easy to part ways with things, but it can really help your financial situation if you do.
Get a side gig – if you research side gigs on the internet, you will find all kinds of opportunities. From data entry to part time CEO, you can find something you are qualified for and many of the gigs can be done from home on your schedule.
Consider a new job – Too often, people get caught up in the day to day and forget that, as time goes on and things get more expensive, a person’s value rises. Experience is valuable. Consider looking for a higher paying job or ask for a raise.
Find the extra money by creating a budget – You would be amazed by how much money gets wasted because it is just there, and our behaviors are impulsive. If you build a budget and “give every dollar a job” as Dave Ramsey often says, you may be able to cut down in some areas to start building the emergency fund you need.
The Ideal Emergency Fund
According to financial experts, the ideal emergency fund would be large enough to completely cover 3-6 month’s expenses. There is one main reason for a fund this large, unemployment. Sometimes, we do not know a layoff is coming so we are unprepared. Imagine the stress reduction you would experience if you knew you had the savings to carry you 6 months! For many people, this feels impossible. What you have to understand is that you do not have to save this all at once. Build the fund over time or save the money next time you sell a house or inherit a large sum. Just keep it in mind for a rainy day.
If you are hit with a financial catastrophe, you need help. Dsouza Legal Group has the experience to counsel you through this rough patch and show you the way to financial freedom. Contact Dsouza Legal today for a free consultation.