3 Fail-Proof Strategies for Common Money Emergencies
Most days, you feel pretty good about your money. But every now and then, worry creeps in. What if something goes wrong?
We’ve got just the thing to bring you peace of mind. These fail-proof strategies can help you survive three common money emergencies.
Emergency #1: Your Car Goes Kaput
Your car does a great job of getting you from point A to point B every day. But do you ever find yourself white-knuckling it around town, afraid a breakdown will leave you and your wallet stranded?
If so, you’re not alone. According to Bankrate, 62% of people can’t cash flow a surprise expense like an emergency repair.
It’s time to change that stat! Before you tackle any other money goals, throw $1,000 into a starter emergency fund. That way, if your alternator goes out on you, you won’t be scrambling to scrape up $500 to fix it.
A thousand bucks might sound like a big chunk of change. But you’d be surprised at how quickly it comes together when you put your mind—and your budget—to it. Why not try a 50/50 split?
First, review your budget. Can you slash $500 in spending over the next two months? That’s $250 each month. It might mean choosing leftovers and brown-bag lunches instead of restaurants for a while, but it’s worth the temporary sacrifice.
Then, work hard to bring in the other $500. Sell stuff you don’t need or shovel neighbors’ sidewalks. Whatever it takes to get to your goal without cutting off your budget’s blood supply!
Emergency #2: Your Home Needs a Big Fix
Picture it: You come home from work and find water all over your basement. Thanks to a busted water heater, you’re staring $3,000 in repair and clean-up in the face. Not exactly a relaxing way to end your day. . . .
If you own a home, you’ve probably come face to face with surprise expenses at one time or another. Maybe your heater bit the dust on the coldest night of the year or your roof sprang a leak during the last rainstorm. Whatever the case, one thing’s for sure: Home repairs don’t come cheap.
So how do you keep impromptu home repairs from soaking your budget? By beefing up your emergency fund once you’re out of debt. Three to six months of expenses in the bank should do the trick. If you spend $3,000 a month on a regular basis, plan on saving $9,000–18,000 for rainy days.
Pro Tip: You’ll complete your emergency fund faster if you dump debt first. That’s because it frees up more of your income each month. For example, if you currently spend $400 a month in car payments and another $500 a month in student loan and credit card debt, that’s $900 you could funnel toward savings once you’re debt-free. At that pace, you could have a fully stocked emergency fund within a year!
Emergency #3: You’re Afraid You’ll Run Out of Money in Retirement
The truth is, retirement isn’t really an emergency. But lots of people treat it like one and panic in the glow of their golden years.
The good news is you have everything you need right now to create the life you want later. You get to tell your money where to go each and every month. If you want to retire in style, all you have to do is plan for it.
We recommend investing 15% of your income toward retirement because it’s enough to build a bright future without cramping your style today. If you bring home $5,000 a month and contribute $750 toward retirement, you could retire with $970,000 to $1.3 million in 25 years!
Don’t have 15% to spare? That’s okay! Start somewhere and find creative ways to work your way up over time. For instance, let’s say you can comfortably invest $300 of your $5,000 take-home pay each month. That’s 6%. If you get a 3% raise every year and roll the monthly difference into your retirement fund, you’ll reach 15% in just five years.
Peace of Mind Starts Here
The average American might not be able to handle an unexpected money emergency—but you’re different. You’ve got the power of a budget in your hands.
That means you get to decide to stop worrying. With a budget in place, you’re more than prepared for any emergency that comes your way!