5 Personal Finance Emergencies Anyone Could Face
As the Chicago Tribune reports, U.S. households spend $57,311 annually on average. This means a typical emergency fund should be around $28,656 because experts recommend consumers have about six months’ worth of living expenses stashed away in anticipation of unexpected costs arising. However, more than half of Americans do not currently have enough saved to cover financial emergencies.
Hurdles to Building an Emergency Fund
This phenomenon is due in part to the cost of living increasing faster than wages. High debt levels are also contributing to people’s insufficient or nonexistent emergency funds. This can fuel a dangerous cycle: Consumers carry debt, making it difficult to save. Then an emergency strikes, forcing people to take on even more debt to stay afloat. For many, this means addressing debt goes hand-in-hand with building an ample emergency fund.
Lifestyle changes may be enough for some to pay down debts and beef up savings. But many people find enrolling in a structured debt relief program helps them stay on track—as evidenced by Freedom Debt Relief reviews and other client testimonials. A consumer who enrolls in a debt settlement program is responsible for making monthly contributions to a dedicated account. When this account reaches a certain threshold, negotiators reach out to creditors on behalf of clients and try to reach a lower settlement. This can make repayment less daunting.
Addressing debt and bolstering emergency savings are two important steps toward overall financial health. Need more proof? Here are five financial emergencies anyone could face at the drop of a hat.
Emergency #1: Losing Your Income
Most people depend on their primary source of income to pay bills and purchase necessities, making it an emergency when money stops flowing in. Whether you’re fired, laid off or simply having trouble finding work, it’s important to anticipate the potential for income loss so you can cushion yourself against the consequences ahead of time.
Emergency #2: Vehicle Breakdown
The average auto repair bill falls somewhere between $500 and $600. One in three drivers can’t afford to pay this amount without acquiring debt. In addition to needing regular preventative maintenance, vehicles can also malfunction in hundreds of different ways. What starts out as a normal day could easily end with a flat tire on the freeway or smoke billowing out from underneath the hood. Are you prepared to finance a vehicle breakdown on short notice?
Emergency #3: Family Emergency
Each member in a family is unique—and the same goes for the emergencies they may suffer. There may come a day when you need to loan a family member some money, so they can get back on their feet. You may have to purchase plane tickets to visit an ailing relative. You may contribute to the costs of a funeral for a family member. Whatever the exact nature of the emergency, these costs can add up quickly.
Emergency #4: Medical Mishap
One survey found 62 percent of respondents “reported concern regarding their ability to pay for medical care if they were to fall ill or become injured.” People with and without insurance worry about this occurrence, as many people end up paying for at least part of an injury or illness out of pocket—if not a majority of it. While preventative care helps, it’s simply impossible to predict medical emergencies ahead of time because the human body is so complex.
Emergency #5: Natural Disaster
Certain geographical areas are prone to certain types of disasters. People who live along coasts may be all too familiar with hurricanes and flooding. People living in central U.S. are likely no stranger to destructive tornadoes. Others contend with earthquakes, snowstorms and volcano eruptions. Some of these incidents may be covered by homeowner’s insurance, but many require disaster victims to cover some costs in their wake.
Knowing anyone could face these five emergencies and more illustrates why it’s so important to eliminate debt and increase emergency savings.