Get a Firm Grip on Your Future: Creating an Emergency Savings
Building an emergency savings is a proactive way to stabilize your financial future. Preparing for accidents, illness, and tragedy is a wise investment in your future.
Accidents can have severe repercussions, some of which extend beyond the immediate or the obvious. The first step to reduce the impact is to financially prepare for it.
What is an Emergency Fund?
An emergency fund is a designated bank account with money set aside to assist you during a crisis. This crisis could be health, home, or work related. What does this mean? This could be a large medical bill, a major auto or home repair, or the loss of a job.
This bank account should remain separate from your other accounts and only be accessed in cases of emergency. It will take a little self-discipline but when life gets difficult you’ll be glad you prepared a financial buffer to get through.
How Much Should I Save?
Three to six months of living expenses will give you a buffer for if you lose your job and need time to find a new one. Consider adding the amount of your deductible for auto repair and co-pays for doctor visits to this amount as well. While we can prepare for a future emergency knowing what it will be is impossible.
How to Save?
The Center for Financial Security states that “People may fail to save for an emergency because they lack financial knowledge, fail to adequately assess the risk of an emergency or simply because they procrastinate.” We all need to save for the unexpected. By preparing now you will be prepared when life suddenly changes.
Begin setting aside 5% of each paycheck for this fund. If possible, have it directly deposited into the emergency account so that you aren’t tempted to spend it. In addition, at the end of every month if there is extra left in your checking account go ahead and move it into your savings.
There are other ways you can save as well. Begin to cut expenses. Create a budget and stick to it. Cook more meals at home and cut out small daily purchases. Save the change when you break larger bills and collect it in an emergency jar at home. Find other income temporarily until you have met your goal. Get a second job or sell items taking up space around your home. Save your tax return and learn to live frugally. There are often many things that we buy daily that are unnecessary. Eliminating them now will help you financially secure your future.
Without savings, you may have no choice but to turn to credit or extended family to make ends meet. New strategies to boost emergency savings are needed.
When accidents or illness do occur contact the NBA Law Firm. They have won substantial settlements for thousands of clients throughout Louisiana and would be honored to listen to your story and evaluate your case.