Prepare for Financial Emergencies
This simple, five-step guide from our Queer Money™ podcast will prepare for financial emergencies with your eyes closed.
Listen to Saving for Financial Emergencies:
Dealing with an emergency is difficult enough, but add to that the stress of not being able to cover your bills afterward. An unexpected accident, illness or car repair can leave you in a lot of financial pain long after the initial crisis. According to a recent MassMutual study, half of our community would be in real financial trouble if faced with an unexpected expense of $5,000. If you’re stressed just thinking about it, listen in as David and John cover the five steps to getting prepared for a financial emergency.
Today the Debt Free Guys address emergency savings goals, the importance of having a separate account for this money, and the value of direct deposit in gradually building enough savings to cover six months of living expenses. Learn why it’s essential to build your emergency savings before you deal with other financial goals and when ‘out of sight, out of mind’ is a good thing! If you’re not prepared for a financial emergency, it’s time to start building your emergency savings today – with these five simple steps!
Listen:
Topics Covered to Prepare for Financial Emergencies
Standout data from the MassMutual LGBTQ Financial Security Summary
- Four in five say high debt levels make managing finances difficult
- 25% report having less than $500 in savings
- 50% say an unexpected expense of $5,000 would cause real cutbacks/they would not get by
John and David’s advice on determining emergency savings goals
- Eventually, save enough to cover three to six months of living expenses
- Do whatever it takes to save $500 as quickly as possible (insurance deductibles)
Step 1: Create a basic, no-frills savings account separate from all others
- Separate financial institution, challenging to access
- Leverage your laziness
Step 2: Note your account information
- Account number
- Nine-digit transit routing number
Step 3: Establish a direct deposit from employer
- Complete employer’s direct deposit form
- Portion of paycheck automatically sent to emergency savings
- Avoid reviewing statements (out of sight, out of mind)
Step 4: Choose an amount to set aside each month
- Direct deposit allows for consistent contribution
- Make small changes (i.e.: giving up one lunch per week)
Step 5: Increase your contribution in proportion to pay increases
- Emergency savings should grow with your success
- 3% raise on $50K = $100/month after taxes
- Contribute at least $25 to emergency savings
John and David’s next steps once emergency saving is established
- Shift focus to other goals, i.e.: paying off debt
- Set up additional accounts for specific purposes (e.g.: home improvements, vacations)