Emergency fund savings is a big challenge for a lot of American people because they have a hard time saving for it. It is not easy to pinpoint the exact reason for it but there are a few possible reasons that can contribute to this financial problem. For one, there are a lot of people who are already preoccupied with debt payment.
For one, this means that they might not have any money left to save for an emergency situation. Their finances only allow them to focus on their present needs. After they have paid for all their debt obligations, they have barely anything left to even set aside for the rainy day. There are also some people who simply do not have the time to save money every month because they are too busy meeting all their financial obligations.
Another reason why emergency fund savings may not be high on the priority list of most people is that they see their credit line as an emergency tool. Especially as NBC News shares credit card debt is a big problem for millennials. If they find themselves in a situation where they need money fast for an unforeseen incident, they will simply swipe their card for it. This can be a good idea only if you can pay off the entire amount when the bill comes due.
However, if you fail to settle the whole amount, there is a big chance that you will be in for another emergency situation. Your course of action is to either use another card to cover for the payment or worse, pay the minimum amount. Once you do settle to pay the smaller amount, your lender now has the authority to slap you with fees and other charges which balloons your total payment amount.
With all these, it just goes to show that having some reserve funds is an important part of your finances. If you want to start now and play catch-up so you can be protected when the unexpected happens, here are a few things to consider to help you do just that.
Take a good hard look at your emergency fund savings
One of the first things you need to do when you want to manage your emergency fund it to gets a picture of just where you are exactly. You need to fully understand how much you have as against your current goal. You need to sit down and start to take a close look at your emergency fund level and review again your goals and emergency situations you are preparing for. This is an important first step which will help guide your next few courses of action to get you caught up.
Identify reasons why you are behind on your goal
Once you have a clear picture of where you are with your emergency fund savings, you need to take a look at what got you in that situation. You are behind on your goal for a reason and you need to pinpoint these exactly. Failure to do these will only make you susceptible to the same mistakes over and over again in the future. This means that there is a good chance that you will see yourself in the exact situation in the future again.
Take the necessary steps to address those concerns
Once you have identified where you are exactly with your emergency fund level and some of the reasons why you are behind, the next step is to take action. If you need to start setting aside a specific amount every month for at least a year to get you caught up then do so. This is the time to make a commitment and make sure you save for your future needs.
Put in safeguards to make sure same mistakes don’t happen again
One of the important thing when it comes to emergency fund savings is making sure that you get to plug up the holes why you were behind on your target in the first place. If you found out that it was because most of your extra funds were being used for online shopping then stop visiting shopping sites. It might also be a good idea to delete your credit card information saved on your devices making it a little harder to shop. The idea is to make sure that you put safeguards in place to help you prevent getting behind on your target again.
Ramp up savings
Once you have a better understanding of your current situation involving your emergency fund, you are in a better position to take control of the situation. You can now start focusing your efforts on actually saving for your emergency fund. With that in mind, here are a few insights on how you can ramp up and fast track your savings.
Automatic transfer of funds
This is one of the easiest financial improvements you can start with because it only requires you to enroll an account once. Once you do, you just have to make sure that there is enough fund to cover the transfer. Once you have that, you’re set to save a specific amount every month automatically without lifting a finger.
Increase your income
Of course, it is challenging to play catch up with your emergency fund savings when your income is a bit low. One of the most obvious decisions you can make is to look for ways to help you bring in more income to your budget. Once you are able to do this, you get to have more funds to cover your expenses and increase your emergency fund.
Lower down expenses
This goes hand in hand with increasing your income and is usually the easier of the two. When you lower down your expenses, you create a wider distance from your income. As this happens, you have more elbow room to move funds around and you get to ramp up on your emergency fund savings by putting more of your income into it.
Manage interest payments
One of the things you might be missing out is that you are leaking financially because you have numerous high-interest payments every month. This usually comes from multiple credit card debts. One of the moves you can do is to consolidate your debt. This helps you combine all your high-interest payments and maybe put them all into a zero percent card. This makes you pay less for interest and leave you with more funds to use for your emergency savings. It might not yield immediate results compared to the last two but it can complement those initial ideas better. It can also help you lower down your financial stress thinking about your debt payments.
There is no doubt that emergency fund savings are one of the most critical accounts you need to focus on and playing catch-up can be challenging. However, it is possible with a deep level of commitment on your part. This will help you be in a better position to address any unforeseen situations that can come your way in the future and even keep you out of getting further into debt. This is because when emergencies happen, you might be tempted to use your credit or take out high-interest loans to help you get by. Once you default on those, they will now start to put you deeper in debt.