Are You Ready for an Emergency?
Your monthly expenses are probably pretty predictable—that is, until they aren’t. The unexpected always seems to happen at the least convenient times. You can’t predict a job loss, a leaky roof, or a big car repair but there’s a way you can meet these challenges with confidence. By building an emergency fund, you’ll be fully prepared for anything life throws your way.
Use these 6 questions to help assess your readiness for an emergency:
- Do I have an emergency fund that I could survive on for at least 3-6 months if I suddenly lose my job or am unable to work?
- Could I access the money quickly if I need it in a pinch?
- Do I have homeowners/renter’s insurance to cover loss or damage to my property?
- Do I have life, health and car insurance?
- Do I have long-term disability insurance?
- Do I have a low-rate credit card to use for emergencies?
If you found yourself answering yes to most of these, congratulations-you're well-prepared for an emergency! If you found yourself answering “no” to a few, keep reading to see how you can start to plan and become prepared in case of an emergency.
How Much Do You Need for Emergencies?
Having an emergency fund can help you feel at ease and prepared for the unexpected, but how much do you need? While experts typically recommend setting aside three to six months’ worth of living expenses, what does that mean for you? A simple way to get started is to figure out how much you spend each month. Start with the basics, like housing, transportation, utilities, insurance and food. Then you can decide if you need to save more. Try this easy-to-use emergency savings calculator to help you figure out how much you need and how long it will take you to reach your goal.
Saving for Your Emergency Fund
Putting aside three to six months of living expenses takes time. Start by opening an emergency savings account and begin making regular deposits, no matter how small. Look for accounts that pay the most interest, so your money can grow even faster. What else can you do?
Set a deadline to reach each of your goals. It’s helpful to have a plan in place to hold yourself accountable for reaching your goals. Having a deadline can help you stay on track. Don’t worry if you get a little behind. What’s important is that you’re moving ahead.
Track your progress. Remember-every little bit counts. Even if you only save a small amount each week, you’ll be building a cushion you didn’t have before. When you track your progress, you’ll see that you’re not only earning interest on the money you contribute, but you’re also earning interest on the interest you earned before. Take the time to enjoy watching your little fund grow.
Resist the urge to spend it. It might be tempting to use your money on the latest technology or a fun vacation, but resist spending your emergency fund unless you really have an emergency. That way, it will be there when you really need it.
Are there other ways to add to your fund?
Sell what you don’t need. If you look around, you’ll probably see any number of items you no longer use or your family has outgrown. Why keep it when you could turn it into cash? Selling at a garage sale or online could net you some cash to put toward your emergency fund.
Get a second job. While it may not be the easiest solution, pulling extra hours for a few months could help you quickly ramp up your emergency savings or give it a healthy start.
Cut unnecessary expenses. If you take the time to track your spending, you’ll probably find many ways to cut back that you won’t even notice. That morning latte may run you $4 a pop. If you didn’t buy one for 280 days, you’d have $1,120 extra. Carrying your lunch instead of dining out could net you even more savings. And, your phone, cable or internet provider may have current promotions or lower cost packages. All you have to do is ask! Then, invest what you’ve saved in your emergency fund.
These are just a few ways to start and maintain your emergency fund. As your fund grows, you’ll probably find even more ways to keep it going strong.
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