Can You Cover an Emergency Expense?

64% of American adults could cover an unexpected $400 expense using cash or an equivalent.

Of the 35% of adults who couldn't cover an unexpected $400 expense with cash or an equivalent, many said they would put it on a credit card and carry a balance (rather than pay it off right away), and 12% said they would have no means to pay the expense. (Source: Federal Reserve)

https://youngandtheinvested.com/personal-finance-statistics/

I truly believe having a savings account with a few months of expenses saved up helps relieve stress, anxiety and fear when the unknown happens.

I’ve often been told ”I have credit card for emergencies” or “if there’s an emergency, I’ll just get a loan."

Let’s look at those scenarios:

These thought processes may work IF there were ZERO RISK involved.

That is...IF you had a crystal ball and knew exactly what the future held.

Let’s say you had an emergency and you put it on a credit card or took out a loan.

The emergency may have been taken care of this time. But the payment is still haunting you. In 30 days you will have a bill with interest knocking at your door.

❔What happens when you get hurt and can’t work for a few days/weeks and your paycheck isn’t what you expected? How will you make that loan payment? Would you get another loan to pay the first loan?

🛑Can’t happen? Before March of 2020, we thought quarantine was only something done in the movie "Outbreak."

❔What happens when you get laid off or maybe just burned out and need to quit ASAP? Not having a paycheck means you really can't make that loan payment. The loan payment also becomes a factor when deciding on whether or not you can "afford" to make a job change.

🛑 Can’t happen? What drives the industry you work in? Government policies, societal spending, mortgage rates, supply chain issues - all of these can affect layoffs. And if the opposite is true, maybe business is booming, but finding quality workers is a challenge. That leads to good workers like yourself picking up the slack and getting burned out. Have you seen the long lines and wait times at just about any place you go? What about the endless "now hiring" signs at every storefront window? What about the mass exodus of nurses and teachers?

These are just two scenarios where your paycheck is impacted.

Unless you have a crystal ball, there is no prediction of what is to come. Prepare now for WHEN "it" happens (not IF "it" happens).

If you need help with making sure you're in a position to cover an emergency expense with cash and not credit, please reach out to me today for a free 45-minute consultation.