Emergency Savings Today- Reduce your debt tomorrow

^{By Bromwich+Smith Staff | 875 words | Reading Time: 4 minutes and 22 seconds | Date: 2023/06/02}
How putting money aside to prepare for an emergency situation now, can help you regain financial independence during a crisis situation.  

If we know one thing, its that life is unpredictable, and that while we never truly expect an emergency- hence the urgency behind emergency we should all be planning for the unexpected.  It often feels that emergency situations arise at the most inopportune times and the old saying “ when it rains, it pours,” or “ Murphys Law” seem to ring true.  Whether it's a medical expense, unexpected job loss, Car accident, or a major appliance malfunctioning having an emergency savings account can provide a safety net during the most difficult times.  

1. Financial Security Blanket. Having an emergency savings account acts as a financial safety net or security blanket. This will provide you with financial security during any emergency. Think of any situation you have been in that required immediate funds. Travel to an out of town funeral, your water tank leaking, your transmission stopped working- how did you feel? Were you prepared to pay the sudden bill? With an emergency savings account in place, you are able to handle unexpected expenses without resorting to adding to your credit cards, securing a loan or other forms of high-interest borrowing.  

2. Building an emergency fund allows you more flexibility with your finances. Whether it's a medical emergency, a home repair, or a temporary job loss, having savings allows you to get through the difficult period without added stress and ultimately this will help you mentally deal with the stress of your situation, without adding more to your plate. 

3. Break the cycle of debt.  One of the most perks of having an emergency savings account is the ability to avoid falling into debt or being able to break the cycle of debt. By having an emergency fund, you can cover expenses with cash, eliminating the need to borrow and saving yourself from added debt. Think about it this way, your furnace stops working and when the repair bill comes in, its more than you can currently pay. If you decide to pay this by credit card, you are now adding the interest on this new debt to the overall price. If you are unable to pay it off, this debt will grow over time and may become too much to be able to pay. Your increased monthly bill grows, and you find yourself unable to pay off another bill in full because the minimum payment on your credit card has grown. What do you do? You may look for added credit, pay off one card with another, obtain a high interest payday or small loan- none of these options help you in the long run and will only strain your financial situation more.  

4. Start Saving. Having an emergency savings account  provides stability and a sense of control over your finances, allowing you to focus on achieving your long-term goals. It will not only guide you during an emergency, but can help you with major life events, such as purchasing a home, starting a business, or planning for retirement. By consistently contributing to your emergency fund, you develop a habit of saving. No matter what your current financial situation is, its never too early or too late to start saving. Even a small amount each month will grow over time and allow you more independence.  

Start with setting a goal, how much do you need to have in your emergency savings? Review your current budget and see how much you are able to reallocate to that each month. Start small, you are not going to be able to grow your savings overnight, and it will take time to reach your goal. Any steps toward your overall goal will help you in being successful. No two people will have the same goal, you may be wanting to have 3-6 months of expenses in case you are unable to work. You may be looking at replacing major household expenses and want to have the money put aside- whatever your goal is make sure that it is reasonable. You do not want to go into debt, and pull money off of a credit card or from a loan just to add it to your savings.  

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In an unpredictable time, where stress and emotions tend to take over reasonable thinking having an emergency savings account is a necessity. It provides financial security, peace of mind, flexibility, and overall support. By having funds readily available to handle unexpected expenses, you can avoid debt, break the cycle of borrowing, and build a solid foundation for financial success. Start building your emergency savings today, even if it's small, and make it a priority to contribute regularly. The short term discomfort from adjusting your current budget will be worth it and your future self will thank you. 

If you are struggling with debt  Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1.855.884.9243, or request a call back at contact us page.