Unfortunately, emergencies happen to all of us. Maybe your pet is suddenly sick and you have to pay an expensive vet bill, or you get into a fender bender and need to get your car fixed. Emergencies are serious, unexpected situations that require immediate action. Many Americans don’t have enough money saved up to cover the cost of unexpected expenses like these and turn to credit cards to pay for emergencies.
While using credit is fine from time to time, it can be detrimental to rely on it, especially if you can’t keep up with the minimum payments. If you fall behind on payments, your account could go into default and negatively affect your credit.
Work on setting up an emergency fund to avoid using credit cards in the future. Here are some steps to get started on building your emergency fund.
Establish a Specific Savings Goal
Start with a savings goal of $1000 and set aggressive benchmarks to reach your goal. Create a budget for your expenses and determine where you can cut costs for a few months. Food, entertainment, and transportation expenses are a good place to start.
Deduct a Set Amount from Your Paycheck
Deduct a set amount of money from every paycheck and put this into a savings account. Many online banking accounts allow you to set this up automatically so that it’s easier to stay on track.
$1000 is enough to cover many emergencies. Once you reach this goal, you can set more modest goals and work on building a more substantial savings account over time.
Consider Other Sources of Income
If you can’t find areas to cut expenses and are having difficulty saving a portion of each paycheck, consider potential sources for additional income. Babysitting, dog sitting, and house cleaning are all good part time options that are always in demand.
Take Charge of Your Finances
Assess your overall financial well-being. Request your current credit report and address any issues or inaccurate information.
If you’ve relied on credit for emergencies in the past and find yourself in debt as a result, take steps to pay off credit card debt over time. If you begin to receive contact from debt collectors, make sure you’re familiar with the Fair Debt Collection Practices Act. Under this law, debt collectors are not allowed to threaten or harass you, and they can’t provide false information or contact your friends or family about your debt.