Without an Emergency Fund You Are One Missed Paycheck From Disaster
What would it mean to you if you had an unexpected trip to the emergency room? If your car required an expensive repair? What if your income was interrupted for a week, or two weeks, or even longer? Do you have an emergency fund built into your budget to see you through these everyday calamities, or are you only one missed paycheck from disaster?
According to a recent survey released by Bankrate, 63% of Americans do not have the emergency savings to take care of a crisis that costs $1000 or more. How do people handle unexpected expenses? According to the survey:
- 40% would use savings
- 23% would reduce other spending to cover the expense
- 15% would use credit cards
- 15% would borrow from friends or family
Many said they had no idea how they would cover an unexpected expense of this magnitude.
So what about you? Do you have an emergency fund? It’s really just one more prep that you should put aside for a rainy day.
An emergency fund is a vital prep
When your finances are tight, sometimes your first impulse is to spend every dime. Many people focus on things like paying off debts, stocking up on food and supplies, or paying more than the minimum payments on bills.
However, that may not be your best bet. Don’t get me wrong – paying off debt is absolutely vital, but most experts recommend establishing an emergency fund as the first step back to financial security. There are several reasons why this should be a priority for you:
- What if you suddenly lost your job and it was 6-8 weeks before unemployment payments began to trickle in?
- What if your child suffered a medical emergency and you needed to purchase an expensive medication?
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