Your bad habit isn’t biting your nails. It’s not chewing with your mouth open. It’s not leaving piles of laundry on your bedroom floor or forgetting to take out the garbage. Your bad habit is that you never save up for financial emergencies.
Not Saving for Emergencies:
You’re not the only one who has this bad financial habit. Research shows that only 41% of Americans can handle a $1000 emergency using only their savings. That means that less than half of the country is fully prepared to cover problems like car repairs, roof leaks and plumbing trouble without scrambling to find enough funds.
You’re capable of joining this percentage of the population when you do the following:
If you don’t budget, you’re making a big mistake. Without a budget, you have no clear guidelines to show you how much you can afford to spend and save every single month. Spending blindly is a risky move. You could easily empty your wallet and rack up your credit card balance without even realizing it, which will leave you vulnerable to any emergency expense.
Make an Emergency Fund
Now that you have a budget, you need to make sure that you add a buffer to account for emergencies. These are savings that can help you cover these urgent and unexpected expenses without impacting the rest of your monthly essentials like groceries, rent and utility bills.
Open a separate savings account and add your budget’s buffer inside. This will become your official emergency fund. Keep adding that amount to it every single month and watch it grow. Soon, it will be a reliable safety net that you can fall back on when something goes wrong.
Have Other Back-up Plans
There will be times when an emergency fund can’t help you. Maybe you’ve just started one, and you don’t have enough savings to cover an unexpected expense. Maybe you just emptied the fund to deal with a problem, and in a streak of bad luck, you’re hit with another emergency. It happens.
You’ll want to have other financial back-up plans available so that you’re not scrambling to find enough money to resolve the problem. If your credit card balance is far away from the limit, you could put the expense on it. If you don’t have room on your card, you could always apply for an online loan. Both of these credit tools allow you to handle the problem quickly and then manage the repayment process later on.
How do you find the right loan? Start by searching for online loans that are specifically available in your state. So, if you live in Miami or Orlando, you should look for online loans in Florida when you need to get fast access to emergency funds. You don’t want to spend time browsing through lending websites, only to find out in their FAQ sections that they don’t provide options to the Sunshine State.
What if you don’t meet the qualifications for these online loans? Then you could ask a trusted friend or family member for an IOU. IOUs should be your last resort when it comes to dealing with emergencies because the average person might not be ready to give you the funds that you need at a moment’s notice.
Another problem that you need to consider is that IOUs can ruin relationships — this is especially true when the borrower takes too long to pay back what they owe. So, this back-up plan should be last on your checklist.
Break your bad habit so that you’re never caught off-guard by a small emergency ever again. You can shrug off that expense and move on.
Krishna Murthy is the senior publisher at Finance XOD. He is not only the senior publisher but also the owner of Tricky Finance. Krishna Murthy was one of the brilliant students during his college days. He completed his education in MBA (Master of Business Administration), and he is currently managing the all workload for sharing the best banking information over the internet. The main purpose of starting Tricky Finance is to provide all the precious information related to businesses and the banks to his readers.