Life is full of surprises. Therefore, planning an emergency fund is an important step in an organized financial life. This ensures that you don’t fall behind on any of your financial obligations. Emergencies can come in any size, shape, or form. You may be faced with a natural disaster, sudden loss of income or unemployment, a death, or other medical emergency. The important thing is that you are financially prepared to face these situations.
Approximately 62% of Americans have less than $1,000 in their savings account, and 21% don’t even have a savings account. This, according to a new survey of more than 5,000 adults conducted by Google Consumer Survey for personal finance website GOBankingRates.com.
Building an Emergency Fund to Become Financially Prepared
An emergency fund is an account that you build over time to use only when an emergency occurs. So, make sure you collect the money in an account that is not easily accessible, and resist the temptation of pulling any money from it in situations that are not urgent. Typically an emergency fund should, at least, be able to cover 3-6 months worth of minimum household expenses. If you are unaware of the household expenses, a good place for you to start is the household budgeting worksheet. ACCC also offers this helpful Emergency Fund Calculator to help you get started. Once you establish what your emergency fund should look like, start saving.
- Savings can come from both big and small actions. Refer to your household budget to find areas where you can reduce spending and add to your emergency fund.
- Not saving enough? Step back and put a little more effort into cutting back on your spending. Start with fewer night outs and more eating in. Make your own coffee at home and bring a homemade lunch to work. Switch off the unnecessary lights and look for energy efficient options to power your home. You can use ACCC’s How to Build Savings by Cutting Back guide to get a head start.
While an emergency fund can protect you financially during a disaster, you may still face serious financial after effects. For a step-by-step guidebook for recovering in a time of crisis, download this Emergency Financial First Aid Kit developed by Operation Hope in cooperation with the U.S. Department of Homeland Security. Being financially prepared takes time and resources- one step at a time.
If you need additional help working through your current finances and goal planning, call American Consumer Credit Counseling to speak to a certified counselor today at 800-769-3571.