49% of Americans don’t have $400.00 in case of an Emergency
In May 2022, the Economic Security Project released the results of a YouGov survey they completed which stated that 49% of the 1,214 respondents would not rely solely on cash to cover a $400 emergency.
Most personal finance professionals agree that $1,000 is the common baseline for where the American emergency fund should begin in a budget. How are so many of us coming up short of what should be our minimum?
I spent many years with an Emergency Fund that kept getting tapped when spending would take me into overdraft territory. I couldn’t see a way out between groceries, minimum payments, and rent. When I finally began prioritizing keeping that emergency fund, I found more than just control of my finances. I found peace of mind.
Play Hard to Get With Your Money
Moving my Emergency Fund away from the rest of my bank account was one of my best moves. By not having easy access to transferring money within the same bank, I made it less convenient to move that money around. For many of us, until we build good financial habits, we view the “Emergency” in Emergency Fund very loosely. I moved my Emergency Fund to an online bank that doesn’t have physical locations. I can still transfer from bank to bank, but it isn’t instantaneous. I have debit card access to the account and keep the debit card secure in case of emergency.
Temporary Budget Pain, Long Term Freedom Gain
Let’s get the bad news out of the way first. We have to make some cuts. We’re going to need to cut coffee out. If you’re buying coffee out every day or even a few days a week, we’ve got to cut it. If your coffee costs you $5.00 per stop, which would be a cheap latte, and you stop twice a week, that’s $10.00, four weeks in a month, and you’re at $40.00. Maybe coffee isn’t your hang-up. You have to find that money and take it back regardless of what it is. Make your coffee, lunch, dinner, or whatever at home to immediately create a little space in your budget. Walk, bike, or mass transit to work, anything to save a little bit of money. You have to sacrifice a little to break some of these habits and make progress toward your emergency fund. You might just be able to find $400 in the span of a month versus a couple of months.
Find Your Why
Take a moment to think about what you would do today if you had to fix your car for several hundred dollars. The thought of that question used to make me sweat. When you’re overspending, over-drafting, and skimming from your borderline nonexistent savings, it’s stressful. My why was that I was sick of being stressed about what could happen. It’s still not ideal if I have to lean on my emergency fund. I would always prefer to avoid the emergency. When the rainy day comes, though, I take care of it. It has done a lot for Courtney and me to make life and our marriage more peaceful. So far, nothing that’s come up has been too big of a deal. We have the money in our budget, so we pay and move on.
How to Save $400 and Sleep Better
Earlier in the article, we found you $40.00 when I told you no more coffee. You’ve now found another $50.00 after combing your last month’s spending and deciding you can cut X, Y and Z from the budget. Keep going and build your emergency fund, and when you hit $400.00, don’t stop. Keep going from there, and when you hit $1000.00, you can pause to pay off debt. If you’re already debt free, keep building on to that $1,000.00, and it’ll be $2,000.00 before you know it. Imagine if not only could you handle a $400.00 emergency, you could pay $1,000.00 and still make rent, still eat, and still pay your bills. That’s some peace.
After the Emergency.
Repeat the steps above.
Read more: How To Save $400 and Sleep BetterIf you are struggling, not making enough, having mouths to feed, or having job/home/food insecurity. I haven’t had that experience so I can’t speak to that, and I send you some strength to keep going if that’s where you are. This article was written from my own personal experience of not using my resources wisely and how I turned it around with the resources I had.