Will An Emergency Hurt Your Financial Stability?
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The phones are down. ATMS aren’t working. Banks are closed. Gas stations aren’t taking credit cards. Grocery stores are only taking cash and are already running out of supplies. Sounds far-fetched, but some of you are probably having flashbacks to the 2009 Ice Storm that hit western Kentucky.
But it’s been over 10 years since that event. Are you as prepared as you were months following that event? Emergencies can look very different throughout our life. Our future crisis may not revolve around the lack of electricity, it may be a job loss, an unexpected death or a medical emergency. It may even be as simple as the transmission going out on a car that’s only a few years old. Emergency is a broad term, but we want to help you navigate these rough waters before the next storm hits.
As we saw in our Facebook poll, 64% of you said that if an emergency happened tomorrow, you wouldn’t be financially prepared.
We can never prepare for everything that might happen. We would live in a constant state of panic if we tried. But we can take steps to prepare our finances for a potential blow. The Federal Reserve emphasizes in their research that many weren’t prepared for the hardships they faced within a year. Hardships such as having their hours/pay reduced, or a significant health issue of a family member, or their business experiencing a bad year.
Another study shows that millions of Americans are only $400 away from financial hardship. Twelve percent say they wouldn’t be able to cover it and 27% said they would have to borrow or sell something to cover the expense. As many emergencies cost more than $400, this doesn’t leave many with any margin for error. One medical test, one new car part, or even one special prescription filled could leave many with either $0 in savings or $0 in savings + debt.
Now, to the main point of this article: Create a 60 day savings goal for yourself. See if you can stretch yourself and save $400 in that amount of time.
So you’re not one of the 39% that can’t cover a $400 emergency expense.
So you’re not adding additional stress to an emergency situation.
So you can keep paying your bills even if something unexpected pops up.
Now, this all sounds great, but how do you do it when you don’t have much extra income as it is? First, acknowledge that it may not be possible in 60 days. Maybe for you it needs to be 90 days. This is all going to be based on your own lifestyle and ability. The important thing is that you prioritize saving over wants (not needs). The eventual goal is to have enough savings to cover at least a few months of expenses.
Here are few things to look at as you get started:
- Create a budget for yourself where you include what you plan to save. As you track your spending throughout the month, you will start to see areas where you’re overspending. Next month, challenge yourself in those areas to spend less to allow yourself more room to save.
- Rethink the extras. Are you paying for a gym membership you haven’t used in months? What TV subscription services are you using? It might be time to downgrade your TV options, even if it’s just for a few months.
- Examine your phone options. Do you really need unlimited data? Do you really need the newest phone? Call your current company to see what options are available to you. If there’s not an opportunity to downgrade your bill, you might start shopping around for a better company. Remember your local library is a great source for movies, books, and TV shows all for free! Some even offer digital/online services too.
- Eat in, not out. Now, this only really works if you’re planning out meals and using what’s in your fridge and cabinets to its max. If you buy a lot of food you’ll throw out in a few weeks, then you may not be saving any money at all.
- Use coupons and cashback apps to help you save on what groceries you need. This goes back to planning out your meals and snacks. If you have a plan, you’ll know what coupons you need. Don’t fall into the trap of “I have a coupon, so stick it in the cart!” If it’s not something you were planning to purchase already, you aren’t saving money by using a coupon.
- Cut back on family outings or date nights. Now, we do not recommend cutting out quality time with your spouse or family. But you might need to cut back on the amount spent going out. Here are some great ideas for fun and frugal family dates.
- Don’t buy impulsively. Check your budget and check with your spouse to make sure you’re not overspending on things that can wait a few more months.
Some extra tips to prep for emergency situations:
- We encourage you to keep a couple hundred dollars’ worth of cash in your emergency kit. If a natural disaster happens and you need cash to buy gas or supplies you’ll have it. Don’t have an emergency kit? Here’s how to make one.
- Put your savings out of sight. When you’re able to save at least $500, you might put it into a CD so it’s a little harder to get to unless you really need it. Or even open a separate savings account that’s for emergencies only.
- Create boundaries for how to use this money. As a family, determine what constitutes an emergency and when you’re allowed to dip into that account.
With debt, little savings and bills that keep coming, it can feel like your finances are taking control of you instead of you taking control of your finances. This doesn’t have to be the case though. Here are a few resources to help you take control and build a strong financial future for you and your family: