Amid these uncertain economic times, it is important to be well prepared for an income emergency. Unfortunately, most Americans are not. Are you?
Take a moment to imagine you lose your job right now —would you be able to face such a thing? If the answer is yes, congratulations. But most people would have to answer no. However, there are a lot of things you can do to improve this.
Here are 4 basic steps to turn the situation around:
1- Assess your situation
The one thing you need to do is knowing exactly where you’re standing right now. Take stock of your income, your bills, and your savings. Create an emergency budget, assigning the absolute minimum required for food, shelter, utilities, and debts.
Compare this emergency budget with your current household’s income to determine if you can make it or not. If you need some advice, you can turn to a nonprofit credit counseling agency so they can help you create a budget.
2- Track your spending
It is important to see where your money is going because it is what’s going to let you see how you spend your money and, most importantly, how to improve it. Assign a certain portion of your income to your budget and then save as much as you can. Find room for cutting down costs and save the difference, even if it’s only a few bucks.
3- Cut your monthly expenses
Take the time to check your utility, cable, and phone bills. See if you can find room for improvement. You can try contacting your service provider and see if they can offer a better deal —there are actually some apps that will help you with that!
4- Plan ahead
This is probably the best way to get ready for a potential financial crisis. The most important step is paying off your debt, so make sure you work towards that. Even if you need to refinance your debt or take a low rate loan to pay a high rate debt, such as a credit card balance.
Emergencies do happen. If you don’t have a strong emergency fund to deal with a potential crisis, follow these steps to make the most out of your money. However, a general rule of thumb is to always pay yourself first! This way, you will be able to save money while you have a paycheck or a source of income coming your way, and, in case things get rough, you have the means to overcome it.
How to start building an emergency fund right now
An emergency fund provides a safety net to rely on while recovering from unforeseen expenses. These 3 tips will help you start building a cushion so you’re covered for the unexpected.
Elements such as unplanned for healthcare costs and natural disasters can put people at financial risk. Using your credit cards to pay for these bills may quickly build large high-interest debts.
If you have enough savings to cover 3-6 months of bills, this can help weather the storm and come out of a financial crisis debt-free. This is why an emergency fund is a need.
Use these 3 useful tips to make your emergency fund efforts successful.
1. Keep Track of Spending
Creating a budget isn’t all that complicated. You just have to write categories of monthly spending and amounts you spend, list all fixed-amount monthly bills (rent/mortgage, utilities, credit card debt), and list monthly payments with varying amounts (groceries, eating out, clothing).
Hopefully, your income is enough that you can pay for these expenses and have extra money each month to put towards your emergency fund.
2. Consider your emergency fund a monthly bill
When you plan your budget, add a line for your emergency fund. Put a fixed amount of your regular paycheck into a special emergency fund account. You can use payroll deduction or electronic funds transfer so it happens automatically each month.
3. Keep emergency funds for real emergencies
As the emergency fund grows, it becomes tempting to use it for other desires, but if you do so you’ll be back in the same dangerous position if a real emergency appears.
So be smart and keep this money for when real unexpected expenses occur.
Learn how to protect your finances in times of recession
The Coronavirus pandemic has had a severe impact on the US economy and experts assure that it has triggered a recession. This means that it's time to check your personal finances and protect them!
As the Coronavirus recession starts to hit the US, it's time to organize your personal finances and apply some methods to protect you from the economic crisis.
Most people aren't ready to weather a recession, so you should check these tips and be prepared!
• Emergency funds
You've probably heard plenty of times about the benefits of having an emergency fund, but many people don't actually build one until the crisis is too close. Now it's time to do it!
An emergency fund can help you through different kinds of unexpected issues, like unemployment. If you lose your job during a recession, it may take some time to find another employer who is hiring, so an emergency fund will be really helpful.
You can start building your emergency fund by setting automatic transfers to your savings account. This way, a small percentage of every paycheck you receive will be destined for your fund.
• Plan B budget
Another method you could use to protect your finances from a recession is to plan a budget for difficult times. Take some time to identify the items you could cut and those you will be needing no matter what.
If you are already under a budget, analyze what expenses you can tweak or even cut. Times may be hard, so you'd better be prepared!
• Payoff your credit card debt
If there's one thing you don't want to carry into a recession is debt. So, prepare a payoff plan and start canceling your credit cards' debt.
It may seem a bit overwhelming, but it will definitely help you feel less stressed if you deal with this issue as soon as possible.
• Don't abandon your investments!
Although you may be tempted to retire your portfolio during a recession, you should try to avoid taking your money out of the market or lose it.
Experts assure that recessions are actually an excellent time to invest, you just need to play it safe and make smarter moves. Try to make some research about financial opportunities in the market and look at your portfolio once in a while.