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The Importance of Having an Emergency Fund

10 October 2017 No Comment

It can happen at any time, something unexpected comes your way such as an illness or a job loss. If you are prepared and have set aside funds for this very purpose, you can get through the rough patch pretty easily. However, if you are like nearly 60 percent of the population per a recent study conducted, you don’t have it. Fortunately, if you find yourself in this very predicament there are ways to come up with the money for the immediate situation and then save to avoid this scenario from playing out again.

Borrowing from family, friends or a bank

Many people live paycheck to paycheck, with most of their salary already factored in to cover expenses before they get paid. When something happens that requires money, a bill previously placed in the pile to pay remains unpaid. Luckily, you have several options for acquiring the money quickly to avoid missing another payment or making a bill late. The preferred way to borrow money is through a family member or friend. This lets you avoid paying interest and late fees that you would have on a typical loan.

If you don’t have a relative or a close friend that you feel comfortable asking, you still have other options. If your credit is still intact and you own a home you can contact the local bank and apply for a HELOC or refinance. However, if you have a few late payments, are overextended or even missed a payment, getting a loan from a traditional bank may prove difficult. There is yet another source for securing the funds you need, a payday loan alternative available to those in a bind. These type loans are generally much easier to acquire. You still need to have a job and show proof of income, but even with a lower credit score, your chances are better at getting the approval you need.

Raising the money

When an emergency comes along you need to lay out the money quickly. In order to stay on track with your already fragile budget replacing the money removed is imperative. If you have no one to borrow from and a bank is not willing to approve a loan, you can still come up with the money another way. Many people host a garage sale yearly to keep their home clutter free. If you haven’t gone through your attic, garage or basement for several years now is a great time to do just that. There is no real planning involved. All you need to do is post signs leading to your home in the local area and then set up your items outdoors. If you have a lot of furniture, baby supplies, and home goods, you could stand to recover a large amount of the money in a single weekend.

Establishing a savings account

In order to move forward and avoid this scenario from playing out the same in the future, it’s in your best interest to start saving today. You can start small and add as little as five dollars a week and then as you debt reduces add more. In just a few months of steady payments, you’re on your way to avoiding another setback.

Reducing your debt

Living week to week is not a preferred lifestyle. It brings with it constant stress and unrest. There is no magic formula for breaking free of the endless cycle. It takes commitment for the long term and sacrifices for the short term. If you are willing to get by on the basics for 6 to 8 weeks and avoid things like eating out, coffee on-the-go, and frivolous purchases you can do it. If you don’t eat out or spend money on items for you, there are still others ways to reduce your overhead to free up monies. You can go to basic cable service, change your cell service to another plan, carpool and use coupons.

Life sometimes throws you a curve. If you have an emergency fund in place you can rest easy. However, if you don’t have monies set aside for emergencies each time will prove to be difficult and stressful.

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