Posts Tagged ‘rainy day fund’

Expect the Unexpected: Get Your Emergency Fund In Place

May 24, 2011

Would you be able to cover a large unexpected expense like a new air conditioning unit for your home or an expensive car repair due to an accident? Turns out if you couldn’t, you’re not alone.

The Wall Street Journal posted an article this week about how almost half of Americans would be in dire straits if they had to come up with $2,000 within 30 days to cover an unexpected expense. I firmly believe that this is why credit card debt is so out of control.

It’s easy to blame our nation’s consumer debt on people who are irresponsible or uneducated about how to use credit cards, but the people I work with who are struggling with their debt got there in spite of being financially aware and responsible. They aren’t spendthrifts who can’t control themselves at the mall. They’re hard-working, disciplined people like you and me who needed to cover something quickly like a trip to visit an ailing relative or their child’s traveling soccer team expenses.

The thing is, even the tightest and most well-thought out budget is going to be tested by expenses that you simply can’t anticipate. For example, I recently had my cat at the vet for a cyst she grew on her toe. More than $750 later, she is on the mend. But you can bet your bottom dollar that I wasn’t planning on shelling out $750 to fix my cat’s toe!

In anticipation of her visit, I even set aside $500 thinking that would be MORE than enough to cover the surgery. And $500 did cover the surgery. But I didn’t factor in the cost of the initial visit, follow-up meds and unexpected additional visits due to her bad reaction to anesthesia. Luckily I have a cushion fund in place and was able to tap that instead of my high interest rate MasterCard.

So how do you avoid getting further into the hole of debt due to the unexpected? Don’t wait to start saving for a rainy day. Don’t wait until you’re out of credit card debt. Don’t wait until you receive your next bonus or tax refund. Start today. Keep paying as much as you can toward your debt, but also put a little bit away, even if it’s just $25 per paycheck.

You’ll be glad it’s there when you need it.