When Times Get Tough: 4 Reasons Why You Should Start Building an Emergency Fund Sooner Rather Than Later

Most people live day to day/ The spending on what they must and try to put money away for a long-delayed vacation, savings for a rainy day, or putting money into new car. But, too many people don’t put enough away or save it strategically.

USA Today quotes the Federal Reserve’s 2014 Survey of Household Economics and Decision making: “47% of Americans say that they wouldn't be able to cover a $400 emergency expense.”

4 reasons you should start building an emergency fund sooner rather than later:

  1. Time is not your friend. Not acting now only aggravates the savings' problem. Tough as it may be to discipline yourself, you must start early with some small but regular system.

You can find money where you didn’t think you had it. Cutting back on spending, reducing credit card balances, and consolidating debt frees up money to save. But, the key element to saving is creating a personal and family budget you can keep.

  1. Figure out what you don’t know now. People talk about savings, targets, and emergency funds. But, they often have no idea what their needs really are. For example, housing costs, car costs, and job income may change over time.

The general advice says you should have six to eight weeks of income in the bank to deal with losing a job. But, that varies for different people and different sized families. If you are going to build an emergency fund, now is the time to figure out what you really need.

  1. Determine what expense will break your back. Some emergencies are worse than others. There are major losses and relatively smaller losses.

For example, you can cover an unexpected $400 or $500 medical or school expense with a personal installment loan. Such loans should be taken out only for emergencies. They are processed faster than traditional banks. But, with their high-interest loans, you want to make sure if you can pay back the loan on time. You can get more information on how these loans handle poor credit records, online applications, and where you can complete your transaction.

  1. Consider your options. If you sit, think about it, and confer with your family, you can get a better fix on your exposure.

Beyond budgeting for long-term needs, you should consider what’s the acceptable limit for a short-term need. The sooner you can put a number or threshold on home repair expenses, medical bills, and school needs the better off you are in terms of financial and emotional security.

Only then can you determine where to place the savings. You need a liquid account where you can access your money for emergencies, but you also need an interest-earning account to make the money work for you.

When times get tough

“Time” and “tough” are terms that differ from person to person. The fact is unexpected things happen and people find themselves short on cash from time to time. As US News says you must make plans so “You'll be ready when life happens.”

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