Putting away money for an emergency may seem overzealous when you’re paying for a mortgage, auto loan and daily expenses. But failing to start an emergency fund can decimate your savings account or force you take out a loan in the face of a leaky roof or a car accident.
MetLife’s 2010 American Dream study shows 45 percent of Americans would not be able to meet their financial obligations for more than one month in the event of a job loss. Another 65 percent be able to cover their bills for no more than three months.
“Considering all these financial pressures, it’s no surprise that stress is running high, with 45 percent of Americans saying that concerns about how they are going to ‘make ends meet’ are keeping them up at night, and 52 percent saying they feel more stress in performing their job requirements,” the study said.
Given the current economic climate, it’s imperative that you find a savings plan that suits you and your financial obligations. Aim to save roughly three to six months worth of expenses in the event of a job loss or other emergency. This can seem like a burdensome figure initially, but stashing money away here and there can be easy by employing a few tips.
-Open a high-interest savings fund and have a small portion of your paycheck automatically deposited each pay period
-Create a budget. Find areas you can afford cutting down on (dining out each night, going to the movies each weekend) and put that money away.
-Negotiate your credit card rates. Talk to your lender and ask them to work with you. If you have a strong credit score, they will be more likely to accommodate you rather than risk losing your business.
You don’t have to cut out all luxuries or never enjoy a nice meal in a restaurant again. Just cut back a little until you have amassed a conservative amount of savings to protect your assets if an emergency should strike.