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 pay to get your car fixed. Emergencies are serious, unexpected situations that require immediate action. Many Americans don’t have enough money in savings to cover the cost of these unexpected expenses. More often than not, they 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 report and credit score.
To set up an emergency fund that can help to avoid using credit cards in the future, follow these steps.
1. 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.
2. 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.
3. 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, or seasonal work such as cutting grass, raking leaves or shoveling snow, are all good part time options that are always in demand.
4. 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, provide false information about your debt, or contact friends, neighbors or family about your debt.
Get Legal Help from Abusive Debt Collectors
Flitter Milz is a consumer protection law firm that represents people that have become victim to debt collector’s abusive practices. If you have been contacted by a collection agency or law firm collector, we will evaluate whether your consumer rights have been violated – whether you fell behind on payments or not. Contact us for a free legal evaluation.