An Emergency Fund for the Rest of Us

Personal finance experts have been saying for decades that most Americans cannot afford a $400 emergency expense, such as a home or vehicle repair or a medical bill.  If you have ever been able to afford an emergency expense, your financial situation has only gotten worse since then.  You can barely afford necessities like rent, groceries, gas if you have a car, and rideshare rides if you don’t.  Everything feels like an emergency when you are charging your groceries on buy now pay later (BNPL), and the advice from personal bloggers that, before you tackle your debts or try to build up savings, you should build an emergency fund; $1,000 is the amount they usually recommend for an emergency fund.  Even if $1,000 is beyond your wildest imagination, any emergency fund you can compile will contribute to the cost of emergency expenses.  For help starting small in preventing your debts from getting bigger, contact a Miami debt lawyer.

An Emergency Fund, If You Can Build One, Is Better Than a Credit Card, If You Can Qualify for One

If you feel like daydreaming about what it must be like to be middle class, read the latest article on the NBC Personal Finance site about how it is better to pay for an unexpected expense out of your emergency fund than to charge it on your credit card.  The reasoning makes perfect sense; if you charge the expense on your credit card, you will pay interest on it, but if you use your emergency fund, you will not.  The problem is that you neither have $400 of available credit on a credit card, $400 cash lying around, nor any other conceivable way to get $400 quickly.

How to Build an Emergency Fund When You Live Paycheck to Paycheck

The good news is that you can start building an emergency fund with the resources you have, although it might not be much money at first.  Don’t be frustrated if you have to spend it before it gets to $1,000; that is reality for most of us.  If you incur a $400 emergency expense, and you have $100 in your emergency fund, the emergency becomes a $300 financial setback instead of a $400 one.  These are some ways to get your emergency fund started:

• Put some or all of your tax refund into an emergency fund
• If your bank offers this feature, have it round up the change of every debit card purchase, so you put a few cents into savings with every purchase
• If you get paid tips at your job, put X percent of your tips each shift into your emergency fund until you have $1,000
• Do a gam`iyya (also known as a sousou, partner hand, and many other names) with friends, such that each of you ends up with a modest emergency fund

Remember that emergency funds are not about paying off debt or building up savings; they are a barrier against your debt problems getting worse.

Work With a Debt Lawyer About Starting an Emergency Fund

A South Florida debt lawyer can help you find ways to build an emergency fund so that you can get started paying off your debts.  Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.

Source:

cnbc.com/2025/01/29/make-this-your-last-resort-to-cover-an-emergency-expense-advisor.html