Unable to Meet $1,000 in Emergency Expenses? Here is What You Need to Do
For many people, missing a single paycheck could mean going into debt. In fact, recent data has shown that only 40% of Americans are able to meet emergencies costing around $1,000 without going into debt. As for the rest of them, they simply cannot afford such a big amount.
Emergency in this context does not mean anything too significant, either. It merely refers to things which happen all the time, like urgent car repairs. And surprisingly, many people are also unaware of the fact that there are many practical ways of increasing your savings for meeting both short and long-term emergencies.
The recent shutdown of the US government left many Americans without a paycheck for days, which is significant considering that this was the longest shutdown in American history. The shutdown compelled federal and contractual employees to dip into their savings, including their retirement fund accounts.
Many also reportedly considered filing a resignation in order to search for other jobs because, without a paycheck, they were naturally unable to pay for necessities such as utilities, mortgages, or rent payments.
Avoid Debt At All Cost
According to one survey conducted by Bankrate, to pay for emergency expenses such as car repairs or any room visit, Americans usually pay with their credit cards or by obtaining a personal loan from the bank. This survey was conducted among 1,000 people with a wide variety of professional backgrounds and asked questions about their expenditure in the year 2018.
When participants were asked about the largest expense they incurred last year, and which came to them unexpectedly, 18% said that it was less than $1,000, while according to 19% of participants, this amount was greater than $1,000 but less than $2,500.
Surprisingly, the percentage of participants who reported this figure to be greater than $2,500 was more than 50%. Even more surprising was the fact that, according to 36% of the study participants, the amount of unexpected expenditure they incurred was greater than $5,000.
These stats show that a small emergency can easily result in a large withdrawal from your savings account (unless you are a millionaire). If you obtain a personal loan from the bank to meet such unexpected expenses, then you not only increase the amount of debt you owe but also must bear additional expense in the form of interest. Credit cards will result in a similar scenario.
How to Increase Your Savings Potential?
Since it is difficult to avoid such emergencies, the only solution at your disposal is to increase the size of your savings account, and in order to increase your savings, you need to be more vigilant about your spending habits. In fact, a little change in your spending habits can result in a lot of savings for you.
So, what are the smartest ways of increasing your savings? The first rule is automation. Open up an emergency savings account and deposit some amount into it every month, which should ideally be automatically redirected from your checking account. You can set up your checking account to redirect some amount to this separate account on a weekly or a monthly basis.
Of course, in order for this to work, you must avoid withdrawing any amount from this account other than to meet emergency expenses. To ensure that you don’t forget what this separate account is for, it is advisable that you designate this account as an emergency savings fund. Many banks actually allow this change of name.
Choose A Different Bank
It is better that you open up this emergency savings fund account in some bank other than your regular bank in order to avoid accidental withdrawal from this emergency savings account. This strategy will also reduce the chance of transferring your money from one account to the other to meet immediate needs.
There is often no transfer fee when you transfer an amount between two accounts hosted at the same bank, while you have to bear transfer charges while transferring an amount between two different banks. This can offer an additional layer of protection so you are not tempted to use up those emergency funds.
More in Financial Adviser
College Admissions Horror: Lori Loughlin Apparently Had No Idea that Bribery is Against the Law; is That an Excuse?
The college admissions scandal that erupted a couple of months ago may be the most shocker as of yet because details...May 14, 2019
Did Lady Gaga Just Wear Her Engagement Ring from Ex-Fiance Christian Carino at the Met Gala?
The first Monday of May is much awaited every year, no doubt. Fashion forward and style experts would know what happens...May 13, 2019
Dwayne ‘The Rock’ Johnson Has a Net Worth of $124 Million, But There’s Something You Don’t Know about His Fortune
One of the most successful wrestlers turned actors is Dwayne Johnson, best known as The Rock — he wasn’t just...May 13, 2019
Kim Kardashian’s Transition From a Wardrobe Stylist to a Lawyer is what Makes Us Love Her
Everybody knows Kim Kardashian, a reality TV star, an entrepreneur, a loving wife to Kanye West, and a thoughtful mother to...May 11, 2019
You Won’t Believe How Arnold Schwarzenegger Made His First Million – Clue: It’s Not Acting
With a net worth of $400 million, you’ll think that Arnold Schwarzenegger made his fortune from the entertainment industry, having...May 11, 2019
Robert Downey Jr. Gave This Pricey Gift to Chris Evans and It Will Make You Say Aww!
Iron Man and Captain America have had a cat and dog relationship in “Civil War” but still, they remain a team...May 11, 2019
How Much Will You Take Home for Playing Iron Man? Here’s The Way Robert Downey Jr. Imitates Tony Stark
We all know that superheroes are not real, but are only made believable thanks to the stellar performers who give out...May 10, 2019
People are Rejoicing over Keanu Reeves’ Campaign Shots for Saint Laurent
There are a few individuals in this world that are exceptionally likable, as in people just generally love them. On the...May 10, 2019
Need Inspiration? Tiffany Haddish Reminisces the Night She Was Homeless and Hungry
Not every one of us gets to come home to a cozy bed after a long day’s work, eat three meals...May 5, 2019