Student loans!! Mortgage payments!! Credit card bills!! All
of these payments create anxiety and
irritation but they are
all real. They are payments we keep in mind when we budget
for the month. Then suddenly, an emergency occurs, be it
small or large. Are you as prepared as you should be to
spend those extra dollars?
With many Americans now living from paycheck to paycheck,
emergencies can and often do send your whole financial
situation into a whirlwind. Your car needs new brakes, your
doctor’s visit required some or more medication, the kids
need new shoes, and the list goes on and on. So what’s the
answer?
Be very careful of placing unexpected expenses on your
credit card. Using your plastic is not too bad as long as
you have a no or low interest rate card, but the typical
credit card now consists of an 18% interest rate charge. If
you are unable to pay it off in full that 18% can really
hurt you later.
Homeowners often bail themselves out by using their home
equity. This can in the end turn out to be a very expensive
solution to your problem. You really should try to stay away
from your 401(k) as well because 401(k) money is pre-taxed
which means the government has not taken its cut yet. When
you use this money as a loan – i.e. you pay it back –
you will have to pay taxes.
So what is the real solution to this problem ? You must stop
procrastinating now and start building an emergency fund.
Your goal over the first year should be to build up a fund
that would support you for 2 months. This is a lot easier
than you think! You can begin to build your emergency fund
by getting into the habit of transferring a small amount of
money into a savings account every two weeks.
For most Americans, an emergency fund of $5000 would meet
this goal. Before you all fall out of your chairs laughing
or throw your hands up in the air with excuses like “I
can't afford that” lets get real, it's only $100 every
week for 50 weeks.
Saving is a state of mind. Once you get into it, it becomes
very easy. There are a number of very simple ways to reach
your savings goal. I recently called my cable supplier and
got them to agree to put me on a special six month deal they
were giving new customers - the savings per month was $60.
Changing over your home phone to an unlimited VOIP (voice
over IP) service can save as much as $50 per month. Taking
lunch to work 3 days a week can save another $100 every
month. Cut back on those coffee shop drinks. Cutting back
from 2 a day to 1 a day could save another $100 per month.
The biggest savings can be made on your grocery bills. I
found a great way to cut my grocery bill by as much as 50%
or more and it works. I even still get to buy all my normal
brand name products by just using coupons and buying the
right way. Using the iCanShop4Less system, I have been able
to save over $125 every week without cutting back on what we
buy.
The only person who can change your life is you, and it's
much easier than you think. All you need to do is take
action and stop procrastinating. You really can stop those
emergency blues with an emergency fund.
