Nearly half of Americans do not have the funds in the bank to pay for a $400 emergency expense, according to a Survey of Household and Economic Decision making published by the Federal Reserve System in May of 2019. This may seem like a surprising fact, but when we take into consideration the high number of people that live paycheck to paycheck and are burdened by various debts, it seems more plausible, and increasingly relatable.
Setting yourself up for success
Many of us feel financial stress daily as we worry about not having the money for unexpected expenses that demand our immediate attention. Home repairs are unavoidable, and many repairs services charge $100 or more just to diagnose the problem and give you an estimated cost for repairs, which can turn that diagnostic fee into a hefty repair bill.
Discovering that your tires are unsafe forces you to find $300 to $800, depending on the type of tires your vehicle requires. According to AAA, the average car repairs these days is $500-$600, so you must find those funds or lose your transportation to work, school, and appointments.
Medical care and medical emergencies are expenses that can’t be ignored and can range from a $40 co-pay, to 20% of the total bill for many Medicare patients, to an average cost of $1700 for emergency room visits. Unexpected travel to a funeral or funeral cost can easily be thousands of dollars.
Since unexpected expenses are unavoidable no matter how much we try to avoid them, the best option is to do all we can to prepare for these unforeseen expenses by building an emergency fund to the best of our abilities. Building up and sustaining an emergency fund of around $500 will take a lot of discipline but will save you from scrambling for cash or over-extending your ability to repay a loan later.
Prepare meals at home
The average American spends 6.1% of their income dining out monthly. When comparing the same foods items, it is roughly four times more expensive to purchase meals from a restaurant, rather than to prepare it yourself at home. Those that are eating out daily during the work week and spending an average of $10 per lunch meal are spending $2500 annually on lunches. Replacing this habit by bringing lunch to work with you could save you over $200 a month! If you’re trying to budget, transition going out to dinner from business as usual to a treat that is enjoyed only on the weekends.
Meal planning for a week sounds intimidating but can be fun! Encourage the entire family to join in by picking a meal they would want to eat that week. Plan out your meals for each day, check what groceries you already have in your fridge and make a grocery list of just what you need. Better yet, jump online to find out what is on sale and base your meals that week around items you can purchase at a discount.
Extend the life of the meals you’ve prepared by accounting for a “leftover” night one day or packaging those to take with you to work the next day.
Sell unnecessary items
Start with cleaning up, painting, and even re-purposing older belongings like furniture and home décor. If you have a good use for them, great, but if you don’t, selling them is a smart way to jump start your emergency fund. They say one person’s trash is another’s treasure, so you should capitalize on that!
Electronics, bicycles, kitchen gadgets, small appliances, and tools are usually good items to consider selling. Keep what you actually need and what you tend to use regularly, but what’s left over is ready for a yard sale. If you don’t have time or space for a yard sale, check into selling your items online or on a social forum like Facebook Marketplace.
Encourage neighbors to join in and create a neighborhood-wide yard sale that will draw more visitors.
Earn extra income
Look into getting a second job if at all possible. Even a few hours per month can really help you build your emergency fund. Many businesses offer employee discounts, so you can save even more with a part-time job at a grocery store, auto repair shop, or insurance agency.
If a second job just won’t fit it your schedule, explore other avenues toward extra income. Utilize your skills to create opportunities through odd jobs for family, friends, and acquaintances. Babysitting, lawn care, pet care, and handyman services are usually in demand. Get creative and feed that emergency fund!
Make budget cuts
Recurring expenses may not seem like a large financial burden when you’re signing up but be wary of any of those “set it and forget it” accounts, as they tend to lean more towards the “forget it” mentality. Any subscription service or membership that you haven’t used in the last three months, simply cancel.
If you have an expensive cable television or satellite package, look at dropping to a cheaper package or stop the service for a period of time if you are not under contract. Streaming services like Netflix, Amazon Prime, and Hulu offer great deal of programming for much less than cable or satellite providers, but only keep the subscriptions you use every month.
Memberships related to health and fitness are tricky, since you want to make your health a priority, but not if they are unused or if you can reach your fitness goals in other ways. Consider what you may pay for salon or barbershop services and see if temporary cuts may be an option. Perhaps the same services are less expensive at a different location. Make sure you are not overpaying and that your current services are necessary while building your emergency fund.
If you can find a way to save only $20 each month, you would have $240 at the end of the year for your emergency fund. If you are able to save $40 monthly, you would find yourself able to handle an emergency expense by the end of the year, with $480 in your emergency fund.
Building your emergency fund is a marathon, not a sprint. Be conscious of your financial decisions, set a realistic monthly savings goal for yourself and have the discipline to reach it!
Take a look at financial advisor Dave Ramsey’s site for more information about emergency funds: https://www.daveramsey.com/blog/quick-guide-to-your-emergency-fund Found yourself short on cash? Learn to build an emergency expense fund for those surprise bills. Until then, Net Pay Advance offers payday loans in CA & TX.