Building an Emergency Fund: Your First Steps
The famous playwright Oscar Wilde once said, “To expect the unexpected shows a thoroughly modern intellect.” In terms of finances, expecting the unexpected is a smart move that spares you from future money-related stress. People who’ve had unforeseen expenses can either tell you how relieved they were that they had emergency funds or how difficult it was to find the money to cover their expenses because they didn’t have a rainy day fund.
Instead of worrying about the future, save up for a rainy day; get started on an emergency fund today.
How Much Do You Need?
Most financial experts recommend maintaining a cash reserve that covers three to six months’ worth of household expenses. To give you an example: In 2016, statistics from the US Department of Labor indicated that the average annual expenditure per consumer unit stands at $57,311. That would give you an emergency fund range of $14,327.75 to $28,655.50.
Does the amount seem excessive? The high price of your financial lifeboat is reasonable when viewed this way: Economic conditions can be uncertain; you can be laid off, and medical emergencies and household repairs could crop up at the most inconvenient times. Secure your financial future with an emergency plan as soon as possible.
Emergency Fund Game Plan
Pay Yourself First
Start your fund contribution by setting up automatic deposits to your savings account. Doing so ensures you neither allow excess spending nor forget to make your monthly contributions.
If your employer directly deposits to your checking account, add a second direct deposit to steer a portion of your pay to your emergency funds. Feel free to also set up an automatic transfer from your checking account to a savings account.
Adjust Your Tax Withholding
Instead of waiting until next spring for your tax refund, adjust your withholding tax now to receive more money in your paycheck.
Make this change by submitting a revised W-4 form to your employer. Expect the adjustments to be reflected in your next pay. Once you receive the extra money, remember to transfer it to an existing emergency fund account.
Request a Rate Reduction on Your Credit Cards
Do you have a credit card balance? Get a reduction in your interest rates to save more each month. And don’t worry about getting rejected just yet; surveys show that asking credit card companies to lower fees and rates work 80 percent of the time.
To get an estimate on your annual savings, multiply your outstanding balance by the interest rate. Remember: the higher your balance is, the more money you save.
Have a Backup Plan
If you happen to need cash quick before you hit your emergency fund goals, it helps to have a Plan B. For some people, a car title loan is the best alternative. With this loan, you can use the car’s value to get money without selling it.
Car title loan providers assess your income and your car’s value to determine the type of loan you qualify for. Most of these loans are based on the vehicle’s real value, which ensures applicants receive fair compensation. These loans also guarantee competitive interest rates and have long terms (12 to 24 months).
Expecting the unexpected doesn’t only show modern intellect; it also proves financial wisdom. Prepare for the unexpected by setting up an emergency fund today.
Do you need financial assistance? VIP Title Loans is eager to help you out. Visit different locations today.