Start Your Emergency Fund Now
“Get you some money, because the storms are coming,” David Ramsey
Life happens and oftentimes, it happens when we least expect it. In the financial world, we know when life comes at you fast, it can wreak havoc on your finances. The last thing you want is to be stuck with unforeseen car trouble or medical bills. Those types of troubles can run you a hefty bill—and not being prepared can cause extra stress.
What is the best option?
The best option is to have an emergency savings fund. Even if you only have $100.00 saved, it will help you in your time of need. According to Vanguard investments, an emergency fund is a stash of money set aside to cover the financial surprises life throws your way. You can start an emergency fund at any time with any dollar amount. Emergency funds are crucial for your personal finances.
Emergency funds will make you feel confident about your finances. It will also help you keep on track with your expenses, ease stress, keep you out of debt and help you budget.
Financial guru David Ramsey says, “Get you some money, because the storms are coming.”
Getting started on your emergency fund
Emergency funds aren’t for the ‘rich’ or for ‘old’ people, they are for everybody! And everyone’s emergency fund will look different. Keep in mind, your emergency fund should cover at least 3-6 months of your expenses, maybe more. If you are in high school, your emergency fund goal might be $100.00. If you are in college, $500.00 and if you have a family with kids, your emergency fund goal might be $20,000. Whoa! I know what you are thinking, $20,000 is a lot of money. In the real world, $20,000 is not enough money if your car breaks down or if you have to home modeling repairs! If you don't believe me, consider this, many Americans find that home ownership is expensive and riddled with repair expenses! Can you imagine if you already had the money saved?
The problems with using a credit
When you find yourself in a sticky financial situation, you might reach for your credit card. The problem here is credit interest rates are not favorable. Not to mention, late payments turn into credit card fees which pulls down your credit score.
When you rely on credit to save you from despair, there is a risk. Consider this, if you use a credit card to save you, you might start a habit that you can’t break. From there, you will find yourself drowning in debt. Credit Card Debt is one of the worst debts you can have.
Fact: The average American has a card balance of $4,293
The average credit card interest rate is 17.41 percent. Last year it was 16.15 percent
What about personal loans?
Taking out an unsecured personal loan to cover emergency expenses is an option, but it is not the best.
Types of unsecured loans:
Credit card cash advance loans
The loans listed above will have the money you need in your bank account quickly. The problem here is sky-high interest rates and hidden fees can be lurking in the shadows. If you do consider taking out a personal loan, only take out what you can afford to pay back. Remember Jay Z said, "If you can't afford to buy it twice, don't buy it."
Fact: Payday loans can have an APR(s) as high as 400 percent.
How do I save?
It is impossible to save tons of money overnight. Remember, Rome wasn’t built in a day. It takes time. Try putting 5 to 10 percent of your biweekly check away for savings. If your employee pays you monthly, save 10 to 15 percent of your check.
It’s so hard saving money
It can be hard to save money. To make money-saving easier, track your spending and trim unnecessary spending. Sometimes we spend more money than we think! Track your monthly spending to see what area of spending you need to cut. I know for me I had to cut my fast-food fry habit.
Once you start saving, your money will rack up. Before you know it, you might have $500.00 in your emergency fund!
Where should I put my emergency fund?
Aim for a bank account that you cannot touch!
Tips for High School Teens
Start putting money away for your emergency fund. Even if you can do only a dollar a week. You will have $365.00 saved by the end of the year. Common high school rainy days can be traffic tickets, cracked mobile devices, lost or stolen clothes or items, etc.
Fact: Top financial emergencies people face:
Medical or dental emergency
Unexpected home repairs
Unplanned travel expenses