Dude, Where’s My Emergency Fund?
Building an emergency fund seems like a manageable first step when it comes to paying down your debts. Under ordinary circumstances, even the most disciplined people end up spending money on the unexpected, because life happens every pay period. Your shoes wear out and you need to buy new ones. Your dental insurance pays for the cavity filling but not the local anesthesia, for which you must pay out of pocket. The trouble is that there is no fixed definition of an emergency. The old adage about how most people would need to borrow money to cover a $400 emergency expense gave rise to the idea that you should build a $1,000 emergency fund before you work on other stuff like the debt snowball. An emergency fund like that is properly a “stuff happens” fund. The assumption is that the emergency expenses cost on a few hundred dollars, and your paychecks continue to come in to rebuild the fund. A true emergency fund should cover three to six months of expenses. Both of these goals are admirable, but they are both harder to achieve than they seem. If you are in a panic because your emergency fund disappeared more quickly than you expected, contact a Boca Raton debt lawyer.
Is Your Money Depreciating in Your Savings Account?
A major reason that emergency funds don’t go as far as we expect is that everything is so expensive. You can easily burn through $1,000 buying a week’s worth of groceries, gasoline, and utility bills if your paycheck arrives a week late. Furthermore, the boost you get from keeping your savings account is not nearly as much as you might hope. Even if the money earns a modest amount of interest, prices increase more quickly, leaving you feeling like you are getting negative purchasing power. If you saved $1,000 in 2023 for emergencies, you are lucky if it pays what would have been $800 in 2023 money, even if it earned two percent compound interest for those three years.
Think Big When You Catastrophize About Emergencies
Another problem is that emergencies rarely happen one at a time. The three to six months of expenses that you are supposed to save for assumes that, if you lose your job, you will find a new one that pays just as much within six months. Everyone who has been laid off from a job knows that this does not always happen. You are lucky if, six months after the pink slip arrives, you are earning enough money from freelance gigs to earn half of what your salary used to pay. Having an emergency fund is a start, but you also need a strategy. It could mean moving in with relatives, filing for bankruptcy protection, or some other major change to help you cope with a financial setback that is likely to have long-lasting repercussions.
Work With a Debt Lawyer About Coping With Financial Catastrophes, Not Just Emergencies
A South Florida debt lawyer can help you if you are dealing with a financial setback that is bigger than the emergency fund that you saved in simpler times. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.
Source:
msn.com/en-us/lifestyle/career/15-reasons-your-emergency-fund-won-t-survive-a-real-emergency/ss-AA29n1u6?ocid=msedgntp&pc=ACTS&cvid=6a8d79fbc9594e43b729f7e8431f8e59&ei=16#image=17
