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A recent Bankrate survey conducted early this year found that only 40% of people would be able to pay for a $1000 emergency out of savings—the rest would need to borrow, either from family and friends or by putting it on a credit card and later suffering the consequences of interest.
Nobody wants an emergency to happen, but when it does, we need to be prepared for it. Not doing so only makes the problem grow larger and causes additional problems like debt.
That said, it does take work to get prepared. Understanding savings and developing better habits will put you on the road to success. Here are some of our best tips to prepare for a potential financial emergency:
Savings can’t be an afterthought. You have to give it priority if you expect to put away anything at the end of the month. You’ve probably heard the phrase “pay yourself first,” meaning put money in your savings account before you do anything else. It’s true. Treat savings just like any other bill. Instead, put that money in an account. It’ll help you prepare for unexpected expenses and build wealth you can use in the future.
When you view extra cash as an opportunity to spend on things you don’t need, you’ll never get anywhere. Work bonuses, tax refunds, and winnings are all great ways to give your savings a boost. If you go on a shopping spree, it’ll be gone right away. But if you save, it’ll be there when times get hard, and can even help you meet the goals you have for the future.
Another thing people often overlook is their loose change. There are many instances of people putting away all the change they encounter in a jar each day and ending up with quite a bit of extra money when they cashed it in at the end of the year. Sure, you’re not going to make a fortune, but something is better than nothing, especially when you rarely use your change.
Having an emergency fund to use when things go south is ideal, but the reality is there may be times when you have no other option but to turn to credit. In this scenario, you’ll want to be sure you have credit available.
If you don’t have one, getting a credit card can help you build your credit score, as long as you use it responsibly. Use it to pay for regular expenses—bills, groceries, gas—and then immediately pay it off. When you have a history of paying on-time and in full, you’ll be more likely to have a better rate available when you need to use it.
Also look into different kinds of credit. If you’re a homeowner, a home equity line of credit might be a good option. This allows you to borrow from the equity you’ve already built in your home. The biggest upside is a lower interest rate compared to traditional credit, so you’ll pay less interest in the long run then if you had taken out another loan.
One of the most common, and scariest, types of financial emergency is a job loss. It’s not just an unexpected expense; it’s a total loss of income, meaning you quickly need to find a new way to pay for all the bills that begin to stack up. Building your resume and continuing your education is a great way to secure yourself in this event. It doesn’t have to cost money—there are plenty of free resources for those wishing to learn new things.
Acquiring new skills will make it easier for you to find another job, and it might even get you a promotion in your current job. If you started your own small business or side hustle, you’d have another source of income you could lean on if your main one were to go away.
Always be looking for ways to improve, don’t settle for less than what you can achieve.
Monthly payments for insurance might be annoying, but if you ever get into a situation, you’ll be so glad you stuck with them. Many people purchase minimum policies thinking they will never need to use them because they’re in good health or are a careful driver. The truth is you can never predict what might happen, and bills stack up fast. One car accident could put you out several thousand dollars, and from having to pay for repairs and possible medical bills, could even put you into debt.
Don’t take the risk of not being able to pay. Insure yourself and guard against the shock of a major bill.
Preparing for an emergency isn’t something you should put off. You can never predict when something might happen. When it comes to saving and starting an emergency fund, Nuvision can help you get started.
We have a variety of options suited to all goals, from the basic saving account to long-term certificates, you’ll find something to fit your needs.
Savings accounts will not only provide security in an emergency, but it can also help you reach financial freedom. By putting away money now, you’re opening up doors for your future.