Emergency Funds

Watching the events of the past couple of weeks, what with Hurricane Harvey flooding Texas, and now that Hurricane Irma is looming in the Atlantic Ocean, I’m reminded of one of the most important reasons that we all need emergency funds. In the event that you have an emergency, how will you manage to survive the days, weeks, or even months that it takes to return to some semblance of a normal life?

With hurricanes in particular, we usually have some warning and there are preparations that can be made, but you’ve got to have the funds available to make the right preparations. For example, you may want to buy plenty of food and water well before the storm comes into your area, or you may need to board up your windows, or if the storm threat is serious enough, you may need to evacuate completely.

After the storm passes, there are still more challenges to overcome… the price of gas, food, and other supplies can skyrocket, which takes a bite out of your already stressed budget. It’s a lot to try and cover on your normal salary, assuming that you’re able to get to work. But how many of us have an extra thousand or two sitting there just waiting for us in times of dire need? According to national statistics, not very many. In fact, 69 percent of us have less than $1,000.00 in savings, and of that, 34 percent have no savings at all.

What about you? What are your options? How can you effectively have an “emergency fund” when you don’t have the cash available?

One of the best ways that I know of to create an emergency fund that you can tap into quickly should you ever need to is to get a credit card and keep the available credit at or above the level that you would need to purchase the items you need to buy food and water, pay those exorbitant gas prices, or even rent the hotel room that you’d need to escape a hurricane, wild fire, flood, or other natural disaster if and when one threatens your area.

Granted, it may not go as far as you need it to should disaster strike, but at least a credit card with your “emergency fund” in available credit will give you options that you may not otherwise have. And those options can be the difference between life and death in some cases.

Avoid Debt By Saying No To An Additional Monthly Payment

Monthly payments are often an irresistible trap to get what we want for a small fee.  After all, who does not want the latest car, smart phone or access to the latest on-line movie?  We all want these things, which is why the additional monthly payment is one of the easiest ways to get into debt.

Follow these tips to find ways to avoid another monthly payment and to keep your debt levels within your monthly budget and financial goals.

Avoid Another Monthly Payment Advice #1 – Just Do Not Look.  Say no to any opportunity to go and look at something that you know that you cannot afford or do not need.  I love skeet shooting and the featherweight, engraved high-end shotguns.  My dad had a beautiful gun that he used for skeet and I have wanted one like it for decades.  However, I have college funds, new tires, and retirement investments that I need to make in order to meet my financial goals.  Therefore, I do not go to gun stores and I do not go to “just look.”  The access of credit cards and impulse financing make it too easy to make a financial mistake.  By not looking, you avoid the impulse and temptation to stray from your financial plan.

Avoid Another Monthly Payment Advice #2 – New Things Do Not Bring Happiness.  How many times do we believe that when I get this new car, phone, computer, etc. then it will make me happy and content?  We purchase the item and it does make us happy, but only for a very short time.  Then, we are on to wanting the next item.  The simple realization that buying more does not bring happiness, then it makes it easy to say no.  Instead of looking for happiness in shopping, find something constructive to do.  Take a class, exercise, walk in the woods, read a book at the library, or find a quiet place and just relax.  Understanding that purchased items will not make you happy is a big step that will help you avoid debt.

Avoid Another Monthly Payment Advice #3 – Pay Off Your Existing Monthly Payment.  One of the best ways to remain out of debt is to accelerate your existing monthly payments if you find something that you truly want.  Want a new car?  Then pay off your existing car quickly so you can purchase a new car.  The act of retiring old debt before taking on new debt keeps your personal budget and finances in alignment with your goals.  Debt happens when we over extend our monthly payments so less and less of our monthly income is available for necessities and emergencies.  Then, an emergency happens, we do not have the savings to deal with the emergency, and the monthly payments get even higher.  Paying off your existing debt ahead of schedule before taking on new debt keeps your debt levels and financial obligations in line.

Avoid Another Monthly Payment Advice #4 – Expand Your Emergency Fund.  Expanding your emergency fund seems to be one of the least exciting and certainly least satisfying things that you can do with your income.  You have items you want to buy, bills you want to pay down early, and you have to set even more money aside in case something “happens.”  Building your Emergency Fund larger helps you to be prepared for even larger financial emergencies.  A roof repair, a health emergency, and even a major car repair can throw monthly financial obligations into massive disarray and start down the path to serve personal debt.  A larger Emergency Fund, although unexciting, is the best way to ensure a one-time negative financial event does not lead to a personal debt emergency.

Avoid Another Monthly Payment Advice #5 – Creative Store Financing Is Not Your Friend.  Most store sales people are well prepared for the arguments of emergency funds, holding down debt levels, and just saying no.  However, the sales pitch is usually something like a perfect dream.  You use the store financing, drive home with the item today, and then the financing does not start for another eight months, or has very low initial rate, or the item can be returned with “no questions asked.”  These financing methods sound great, but that is where the greatness ends.  Ultimately, these unscrupulous financing methods compound your personal financial debt and do not erase the debt burden.

Avoiding additional monthly payments are one of the key ways to remain on your budget and on your financial plan.  Refusing to shop for items you cannot afford, realizing new things do not bring happiness, paying off existing debt, increasing your emergency fund, and saying no to store financing are the best ways to keep additional debt in check and your financial goals on track.

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‎02-13-2017 07:10 AM

Content provided courtesy of USAA.

By Chad Storlie