What’s Your Emergency Fund?
Very few people have a plan for when something bad happens. In fact, some peoples’ plan seems to be to be to hope with all of their hearts that something bad doesn’t happen! It seems to work really well until something does happen, and that’s when things fall apart. Let us clear the air for you right now, accidents do happen, and you need a true emergency fund.
Actually, let us be more clear: Accidents will happen. Eventually, something that can be classified as an emergency will pop up in your life, and it is your responsibility to prepare for it. A lot of people don’t like the word “responsibility” but it’s a cornerstone of financial stability.
What’s Wrong With My Emergency Credit Card
There are so many people who we have met that have their emergency credit card for when that time arrives. They have a plan right? That’s good right? When has a good plan ever included making the problem worse? There is nothing like taking a time in your life that is already terribly stressful and adding the cloud of looming debt payment above your head, and especially if you won’t be able to make the monthly payment.
Many people live to the nickel, and even a new bill as small as a $60 or $100 each month would be enough to push them into financial ruin. What an emergency credit card really does is:
- Establishes a false sense of security by making you feel as though you are ready for a bad situation
- It then takes the bad situation and moves it to some point in the future. Eventually, you will face the financial burden of this problem, and your credit card company will make you pay dearly for the “bought time,” or as we like to call it procrastination.
- It places you in further financial dire straits as you now have a new bill that you most likely haven’t budgeted for and may not have the income for.
A true emergency savings account avoids the problems listed above. It takes a problem that is happening now, and eliminates the current financial stress of it. This leaves you to only have to deal with the emotional stress of the situation, though difficult, you will at least not face financial ruin because of it. Avoid the emergency credit card and work on an emergency savings!
How Do I Create An Emergency Savings?
We’ve written an entire article to answer the question: how do I start an emergency fund? Is it OK to have an emergency credit card while you are working on your emergency savings? Absolutely, but don’t allow it to be your plan, use it as a means to your end. Use it as a stepping stone to get to the financial independence that is an emergency savings.
What are you doing for emergencies right now? Do you have an emergency credit card or an emergency savings? Are you working towards an emergency savings and what tips and tricks have you encountered?