Aside from buckets of food that will last 25 years and other doomsday products (yes, that’s a real thing), there are some easy ways that you can prep for emergencies financially.
Assuming that the emergency is something a bit less serious than an electromagnetic pulse that takes out the worldwide financial infrastructure, like say you get in a serious car accident and you break your leg and arm, you’ll want some savings that are set aside to survive on. Additionally, if you don’t have to rely on credit cards, it can also give you some peace of mind that you’re not having to rack up massive bills.
Here are some suggestions on emergency savings to help you start.
- First, start small. Do you have a $10 dollar bill in your pocket for spending money? That’s a good start! Or even $5! See, you’re doing great! Financial planners usually advise that you should build an emergency fund that will cover six months of expenses, and that probably seems like a formidable amount of money, but that’s something that should be your goal, not something that you need to start an account with. So start with a realistic amount of money, like say $10 a week or a month, and then . . .
- Second, do it regularly. Contributing even a small amount of money on a regular ongoing basis is the best way to build up this kind of emergency fund over time. Some employers allow you to separate out a portion of your paycheck into a separate account, but you can do this yourself every time you get paid. In this day and age, you can probably just set it up on your online banking too. But aside from just doing it automatically you might want to think about . . .
- Third, save windfalls and bonuses. Sometimes you’ll get a present, a tax refund, a bonus, or some other unexpected lump of cash, and while it’s tempting to blow that on something that you want, put some part of it in your savings account. Maybe pick one thing to splurge on that costs some part of the money, and then put the rest in savings. Also, don’t go out looking for things to buy, especially if you can’t think of something right now that you want off the top of your head. Just save the money. It’ll make you feel better in the long run. And speaking of stuff . . .
- Fourth, don’t be a hoarder. Look around your house and ask yourself if you’re actually using everything that you have in your house. If you haven’t used something in six months or a year, then maybe it’s time to give whatever it is a better life in another home. Think about having a yard sale, or putting some things up for online auction, or even selling things through consignment shops. Take the money that you make, and then put it in savings. Finally, you can look beyond stuff you already own to . . .
- Fifth, look at your expenses. Look at where your money goes. Do you eat out a lot, go on a lot of vacations, or pay for cable but you never really use it? When you think about things when looking at a budget sometimes it becomes clear that you’re paying for things that you really shouldn’t be. Heck, if you find a friend to watch Game of Thrones with, do you really need HBO? You should be regularly judging if you need things that are costing you money, but this article is about savings, so consider saving that money instead!
On the more “Edward Norton is going to blow up all the major financial institutions and set everything back to zero” front, you should try to keep at least a hundred dollars of cash hidden at home in a safe place, or two normal grocery trips worth if you have a big family. If the power goes out, cash is almost always negotiable and that means that you can pay for basic necessities in the event of an emergency where the electrical grid is down or where credit card machines aren’t working.
As always, we would be happy to discuss what you can do to improve your financial situation or recommend a great financial planner. If you want to talk, give us a call some time.
Tags: one good joke