He talked about the very scary realization that this Covid crisis revealed which is how many Americans aren’t prepared for an emergency.
The COVID-19 pandemic has drained many Americans’ emergency savings. In a summer Bankrate survey, 21 percent of Americans said they had no emergency savings whatsoever. Moreover, 35 percent of Americans said they have less emergency savings now than prior to the coronavirus pandemic.
Not being able to pay for emergency expenses can lead to crushing debt and a pile of unpaid bills. That’s why the time to start saving for an emergency is today. If you save while things are good, you will be prepared when the unexpected happens. Having a savings account dedicated to an emergency can make a stressful situation easier to handle.
Have you ever heard someone say, as soon as I get out of debt, I’ll start saving? I think we’ve all probably said it at some point…I know I have. The trouble in our society is that many families NEVER are getting out of debt and that means they are NEVER starting to save.
Start by taking these 8 simple steps.
8 easy steps to get your emergency fund started
1. Make a budget and see where you can start saving more money
It’s important to know where your money is going so that you can find saving opportunities. Without budgeting, you won’t be able to maximize income and find ways to reduce or manage your spending. Through careful budgeting, you may find that you need to cut expenses or perhaps increase your income. One way to boost the amount of money you’re taking in could be through a side hustle.
2. Using your budget, make your savings automatic by splitting a portion of your direct deposit into a savings account or money market account
If you’re putting your hard-earned money into savings, make sure you’re maximizing the interest you’re earning by getting a competitive annual percentage yield (APY). Typically, online savings accounts and money market accounts offer higher yields than brick-and-mortar banks.
If you’re just starting to save, look for an account with a low minimum balance requirement and no monthly fee. Again, online banks typically offer these.
3. Gradually increase the percentage you’re saving or the amount you’re saving, if you’re able to
This will help you continue to give your savings a boost. If you increase the amount you’re saving, and don’t miss having this money in your checking account, then this increase was probably a good saving move.
4. If you receive a windfall or any sort of cash as a gift, try to put at least a portion of it into your savings account to give your emergency fund a boost
A tax refund is another example of money that can help grow an emergency account.
5. Plan to cover at least three to six months of emergency expenses
You’ll determine this number from looking at your budget (from step one) and calculating how much you need each month to cover essential expenses. Rent or mortgage, food and transportation are some of these necessary spending categories.
6. When you reach that goal, keep saving
If an emergency requires more money than a six-month cushion, you’ll be relieved to have this extra money on hand.
7. Put longer-term savings in a long term savings vehicle that will get a good rate of return and protect you from market volatility. Make sure your money is working for you and growing while you sleep. We will talk more about the way to save tax free next week…even better!
8. Budget like the wealthy do. Be sure that you take time to pay yourself first by saving. Treat your savings like a bill just as you would your car payment. You would never think of NOT paying your car payment. Shouldn’t your emergency fund be just as important?
I hope this has been helpful friends. Be sure you invest your time in speaking with a financial educator like myself or someone else you know and trust to help YOU help yourself.
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