Financial Emergencies: How to Not Learn the Hard Way
Whether you have a nest egg of money saved or you have nothing to your name, financial emergencies are bound to happen. They also happen when you often least expect them.
If you don’t have a savings in place, you are certainly not alone. Less than 38% of Americans have at least $1,000 in their savings. So roughly 62% of the country doesn’t have a savings. This means they are spending as much or more than what they make.
So why is this the case, even though we all know unexpected expenses are going to come up? It’s because most people are not planners. So, here are a few outcomes that will hopefully persuade you to start an “uh oh” fund.
You can’t pay for that emergency.
Let’s say you live in Florida and your AC unit breaks in the summer. To make matters worse, you don’t have anything saved to replace it. But, in terms of an emergency, there are worse things than sleeping in 85 degrees. So then you decide to just live with it until you can pay for a new unit and it’s the sweatiest, most miserable few months of your life.
Or you borrow the money.
Maybe you live with no AC for a week and you just can’t take the heat, so you cave and decide to charge a new $3,000 unit on your credit card. The problem is you are already used to living pay check to pay check, so most likely you don’t pay your full credit card bill. So, then you are collecting interest and depending on how long it takes you to pay it off, it could cost you hundreds to thousands in the long-run. This is all because you didn’t have an emergency fund to fall back on.
So, those are some of the likely outcomes if you are not prepared for surprise incidentals. Don’t learn this the hard way. There is no better time than now to start saving a little by little. This savings should be designated for only emergencies. You will be so happy when something does happen and you can pay for it up front. But, don’t forget to replenish your savings balance. And if you must borrow money, set up a reasonable payment plan to pay it off in the quickest time possible and stick to it.
