Financial emergencies happen all of the time and you need to be prepared for them. Unfortunately, most people in Texas tend to live paycheck to paycheck. When something bad happens, they are ill prepared to deal with it.
There are two things that you need in order to deal with a financial problem. One, you need to be prepared and have a plan. Two, you need to have an emergency savings account. Let’s take a look at how to do both of these things.
Having Am Emergency Money Plan
For the occasional, car blew a tire emergency, you do not necessarily need a plan. You do however need a plan for a more major financial problem. What would you do if you suddenly lost your job or became temporarily disabled? Would you know how to handle it?
For most people, the answer to that question is no. Take a little time now to come up with a plan to cut your expenses to the bone when money becomes scarce.
Know what bills you can cut, which ones you can eliminate and who you have to contact in order to get things done. Things like gym memberships and other subscription services have certain procedures in place for cancelling them or putting them on hold. Familiarize yourself with these and even write the instructions down so that you are ready to jump into action if needed.
In addition, have a plan for cutting other variable expenses like food and entertainment. Hopefully you know how to cook because this will be an essential skill in a crisis. If you know how to cook your own food, you can skip on the processed expensive food and make meals for pennies a serving. If you do not know how to cook start learning now, it really is not that hard.
Have An Emergency Savings Account
Ideally, you need to have 3 to 6 months worth of expenses in a savings account. A tall order yes but if you lose your job or find that you can no longer work, it will be crucial. Even if you were able to receive aid, it takes time for programs to kick in so you will need money.
The key to building a savings account is to go slow and steady. It is not going to get there overnight, so be patient. Start taking out a portion of your take home pay and diverting it into a savings account. 10 percent of your pay is ideal but if you can not swing that right away, save what you can.
As far as savings accounts go, do not use your regular bank. If you live in Ennis, it might seem natural to keep your money in Ennis but this would be a mistake. Instead, choose a high yield online account. This will do two things for you.
One, the online account will be accessible but not overly convenient. The inability to make instant transfers will help keep you from impulse buying. You can still get to your money in an emergency, but it will take one to two days on average to transfer it over. This gives you time to think about what you are doing.
In addition, a high yield online account will earn you far more interest than what your regular bank will give you. While 2 percent is not a fortune, it is far better than the 1/2 a percent your bank would provide. Besides, 2 percent interest can add up to a lot of easy money over the years with compound interest.
Finally, choose your online savings account carefully. Look for reviews and make sure that they do not have surprise fees for withdrawing money or use any other sneaky tactics. Only choose accounts with 4 plus star ratings.
Saving money and preparing for emergencies is never fun but it pays huge dividends. These are the things that we have to start doing as we grow up and become responsible. It is important for you and doubly important for your family if you have one.
Being prepared can also save you a ton of money and will ultimately pay for itself many times over. Build that savings and say goodbye to emergency loans forever.