Anyone in this boat is in a very difficult position.
the main points
- It is necessary to set aside money for emergencies and unplanned bills.
- Although some people are prepared, others may struggle in the event of a job layoff or emergency expenses.
- Temporarily cutting back on discretionary spending and getting a second job can help you boost your emergency savings.
You will often hear that building an emergency fund should outweigh any other financial goal you may have. But the A new report released by the CFPB The Consumer Financial Protection Bureau reveals that many people fall short when it comes to emergency savings.
In its research, the Palestinian Consumer Protection Council asked the following question: If your family loses its main source of income, how long can you cover the expenses? In response, 27% said they could cover over six months’ worth of bills, while 21% said they could cover three to six months’ expenses.
Worryingly, however, 21% of respondents said they would be able to cover less than two weeks worth of bills in this situation. This is a very scary idea.
You can’t afford to go unprotected
There’s a reason financial experts have long urged consumers to keep enough money in their accounts Savings accounts To cover at least three full months of basic expenses. You never know when you might suddenly hit a giant bill, like a home or car repair that can’t be put off. without solid emergency fund, you may immediately land in debt to cover such expenses. And this debt can easily build up and cost you a lot of money in interest over time.
Moreover, you never know when you might lose your job and struggle to find another. The reason experts caution against keeping three months’ worth of bills in savings is because it can easily take that time to look for jobs, apply, interview, and get hired elsewhere. And during a recession, finding a job after being laid off can take longer. So you really want to have a nice cushion in the bank in case you need to live mostly or partially off your savings for a while.
And if you’re thinking you can always eject a personal loan In the event of a layoff to cover your bills, keep in mind that without income, you may not qualify for one. So do not assume that you will not need savings in this case.
How to build or increase your savings
If you have The emergency fund needs workThere are steps you can take to boost it. for one thing, Put yourself on a budget And start cutting back on unnecessary expenses. You can’t skip paying your rent or Mortgage. but you are can Pledge to stop eating out at restaurants and cook all your meals at home until your savings account is in better shape.
At the same time, it is worth considering getting The second job To quickly increase your cash reserves. If you are limited to spending deductions only, it can take a very long time to build up a good level of protection. And then, you risk something happening Before You really had an opportunity to make good progress on your savings efforts.
Having some money in the bank is better than no money at all. But if you’re in a position where you can’t cover two weeks of bills with the money in your savings, it’s really important to make building an emergency fund a priority—and soon.
Alert: Highest 0% APR cashback card we’ve seen right now offered through 2024
If you use the wrong credit or debit card, it can cost you big money. Our expert loves This is the best choicewhich features a 0% intro APR through 2024, an insane 5% cashback rate, and all in a way, with no annual fee.
In fact, this card is so good that our expert personally uses it. Click here to read our full review Free and apply in just 2 minutes.