Sink or Swim: What You Should Know About Financial Emergencies
Across the nation, millions of Americans aren’t prepared for a financial emergency. If this sounds like grim news, that’s because it is. It’s an economic predicament that could spell disaster. Fortunately, there are solutions. Here’s what you should know.
The State of Emergency.
As things are now, about 62% of Americans can’t cover any unexpected expenses. A recent Bankrate survey also found that only 38% of Americans said that they could cover an unexpected trip to the emergency room, or a $500 car repair, with the cash they have on hand or in an account. This means that approximately 197 million people are unprepared to absorb the cost of an illness or injury, or repairs to their car or home.
These folks are just barely keeping their heads above water. More than half (55%) of respondents in a Pew survey reported breaking even each month, or living beyond their means. The same poll also found that one-third of the polled 7,845 households didn’t have any savings at all.
The Plan of Action.
You don’t go down with a ship just because it’s sinking. You bail it out, and do something about the situation.
There’s no golden rule about saving. Some say that you should save an entire year’s salary. Others think that abut $1,000 is enough to have on hand to cover most emergencies. Most of the advice tends to fall between one or the other. The Teachers Insurance and Annuity Association of Americans suggests saving about three to six months’ worth of living expenses in an account.
If you have a structured settlement, you can also sell it for cash. Should some catastrophe happen to you, you can get money for your settlement in as little as 30 to 40 days — or sometimes even less.
Being financially stable doesn’t just mean having a savings account, however. You should also be actively paying off your debts. While it might be stressful to have a $50,000 hospital bill hanging over you, it’s always a better idea to pay off the debts with the highest interest rates first — like credit card balances. Getting those smaller debts squared away can help when it comes to tackling the larger ones, both from an economic standpoint and an emotional one.
Though millions of Americans are in rough financial shape, there is hope yet. If they can save and start to pay off debt, they’ll soon find themselves pulling away from the brink.