Be it illness, divorce, or natural disasters, you never know when an emergency may strike. Saving whenever you can before, during, and after an emergency will help you stay afloat during hard times.
Here are 5 tips for saving for emergencies:
Always Have An Emergency Fund
If you don’t already, have an emergency fund set up beforehand. An emergency fund will help provide you with the money you need for home repairs in case of fire or flooding, family illness and hospitalization, and the loss of a job. These funds are to be strictly used for emergencies when you need money fast.
Put Additional Money Into Savings
Did you receive a bonus at work or money as a holiday or birthday gift? Put that additional money into your savings account for a rainy day. If you received a stimulus check during COVID-19 put that money towards emergency savings.
High-yield savings accounts are also a great way to boost your emergency savings.
Avoid High-Interest Payment Plans & Credit Cards
High-interest payment plans and credit cards will wind up costing you more over time, so avoid them during emergencies. If you must get a payment plan or a credit card during hard times, carefully research your options to find one with the best interest rates for you.
Have A Budget & Review It Monthly
A healthy monthly budget goes a long way in helping you balance what you make each month and how much you spend. During emergencies, you may have to cut back your spending and redo your budget to accommodate. For example, eating out less and setting a cheaper grocery budget.
Review your budget monthly to double-check your spending and make changes where needed. There are many apps like Mint from TurboTax® available to help you visualize your budget and finances.
Talk To Your Lender About Payment Deferments
During COVID-19, many lenders have temporarily deferred payments. Use that time to help build up your emergency savings.
If you need your payments deferred talk to your lender and provide them with a letter of hardship. This letter explains why you cannot currently make your monthly payments, either due to unemployment, illness, or the death of a spouse. Be polite, direct, and offer solutions in your letter and provide accurate financial proof of hardship. It will go a long way in helping your bank determine your eligibility.