Your Financial Turnaround In 2019 Could Begin With Emergency Savings
Jan 4, 2019, 6:49 PM | Updated: Feb 7, 2023, 11:20 am
SALT LAKE CITY, Utah – Ask someone if they are saving enough money and chances are, they will tell you “no.” In fact, a recent report from the Federal Reserve Board has found four in ten Americans do not have enough money to cover an emergency expense of just $400.
You just never know when you might get hit with a trip to the emergency room, or a stubborn car that refuses to start or by a furnace that is on the fritz. These are all reasons why having an emergency fund should be a top priority in the new year.
“I know that’s not exciting and it’s not sexy, but by far and away, it is going to be the best thing that you can do to get your finances in order,” said Jenie Connors, a certified financial planner with Diversify Investments. “If we have a little emergency fund in place then we are less likely to make some sort of rash decision like trying to borrow money out of our 401K or pull money out of an IRA.”
A @federalreserve Board report found that 4 in 10 Americans could not cover an emergency expense of just $400. What are your 2019 resolutions to keep more money in your pocket? https://t.co/0vJAh9hlys
— KSL 5 TV (@KSL5TV) January 5, 2019
Connors recommends saving enough money to cover at least six months of expenses for a single income household. For a two-income household, three months will suffice.
“We’re talking roof over our head, food in our tummies, clothes on our backs, gas in our car,” Connors elaborated.
If that’s more than you can manage at the moment, even $1,000 will help you cover an unexpected bill without having to borrow money. To get there, you might have to cut your spending a little here and there. That means actually going through your bank account.
“Becoming conscientious of where that money goes is key,” said Connors. “Maybe we’re a little afraid to go in and kind of take a peek at those things, but, you know what? Go in (to your bank account) and look at it line by line. (Ask), ‘Where’s my money going?’”
Maybe your money is going to an unused gym membership, a daily $6 cup of coffee or to subscription for an app you haven’t used for months.
“You would be surprised at how much money you can actually save by just making small changes in your spending habits,” Connors said.
It's the little things that add up! https://t.co/YO5RVFFrJr
— Trim (@ask_trim) October 11, 2018
Just saving $25 a week can build a $250 emergency fund in ten weeks. Bump up the savings to $40 a week, and you will stash $500 in three months.
Plus, you don’t have to find savings on your own.
“There are a lot of tools online nowadays that will do it for you,” said Shane Stewart, a certified financial planner for Deseret Mutual Benefits Administrators.
He recommends apps like Mint that can connect with your bank account and categorize your expenses from your debit or credit cards.
#HappyNewYear, Minters! Start the year off investing in yourself! In 5 words or less, what’s your number 1 financial goal for 2019? 🤑 🎊 pic.twitter.com/FNWQ9xbqdG
— Mint (@mint) January 1, 2019
Download Mint: Personal Finance & Money
Other similar apps include AskTrim that not only finds unwanted subscriptions and recurring expenses by analyzing your bank account, it can also help you cancel them. Another app, Joy, lets you rate purchases as “happy” or “sad” to help you avoid making the same purchases in the future.
“They vary in how you interact with the tool, depending on your personality,” said Stewart. “To each his own on how to track that (your expenses) but the important part is this: you need to track it.”
One final key to saving for an emergency is to use your emergency fund only for, well, emergencies. Sorry, but unbelievable deals on clothes, gadgets or travel do not qualify.
