Sometimes, setting credit card debt can get out of hand and you can find yourself in financial distress. This is why our debt counselors recommend building your buffer with an emergency fund. It is kind of like health or car insurance: if something bad happens and it’s not there, you’ll find yourself in a world of trouble.
How Much Do You Have in Your Emergency Fund?
Whether you face a natural disaster, sudden loss of income or unemployment, a death or other medical emergency, or anything in between, planning and having an emergency fund is crucial. This is so that you don’t fall behind on any of your financial obligations and debt relief efforts. Also, it is important that you understand:
- How to plan for emergencies
- How to start and actually contribute to your emergency fund
- Who you can contact for help in the process.
If you have a plan when an emergency strikes, you will be less likely to acquire credit card debt and need debt assistance down the road. While an emergency fund can protect you financially during a disaster, you may still face serious financial after effects. Therefore, having some level of preparation to face an emergency is crucial.
So, how much money should you really have saved up for emergencies?
An emergency fund is a savings account that you can use in case of illness, job loss, or any other unexpected life event. It’s different than normal savings accounts because it’s used only in case of emergency. It’s designed to act as a buffer to help you get back on your feet after something unexpected happens.
At a minimum, three to six months’ worth of expenses should be carried in an emergency fund. To calculate how much this will be for you, you’ll need to take note of how much you spend every month on necessities like groceries, rent, and getting around.
How Can Your Save for an Emergency?
First, you can take a set chunk or percentage of every paycheck and put that directly into savings. Second, if you get a tax return, plan on putting away half of that immediately into the fund. Third, if you work more than one job, stash the majority of your second paycheck in savings every week. If you want to build up your emergency fund fast, put any money you have coming in that isn’t going to your living expenses directly into the fund.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.