An emergency may be unexpected, but it is not necessarily unforeseeable. If you’re not planning for life’s emergencies ahead of time, you may end up turning to short term loans as your only way to finance them. However, there are other ways to stash away emergency cash for when life hand’s you one of its little emergencies.
Medical Expenses
Health insurance is one way to plan for medical problems you can’t predict, but are due to happen. To plan even further to pay for co-pays and the deductible, you can also set up a flexible spending account with your company. The funds are automatically deducted from your paycheck on a pre-tax basis each pay period and they can be used for health items like eyeglasses and dental care. Not only is the saving painless, but it also can give you more savings due to the pre-tax status. If you work for yourself, you can set up a Health Savings Account (HSA) instead, and roll over the savings if you don’t use them that year.
Repairs and Maintenance
Owning a car or a home can come with unexpected repair and maintenance costs. You might not know when you’ll have an emergency, but you know it will eventually happen. To avoid having to take out short-term loans that may be difficult to repay, you need to plan ahead and save now. Get registered for a home maintenance plan that can be as low as $50/month and cover major repairs like electrical problems in the home or bad appliances. Having a savings account set aside and using direct deposit to direct a portion of your paycheck to it can help you prepare for those emergencies.
Building an emergency fund is not difficult. It just needs to be consistent. If you have extra consider loaning it to family and friends, so that when your turn comes around they’ll be there for you, too. If you automate savings and plan ahead it removes the stress of being caught short when bad things happen. It can be a wonderful feeling to know that the money is in the bank for a repair or replacement when the air conditioner fails during the height of summer or something else occurs that you may not have foreseen, but you were wise enough to plan for, regardless.
That’s an interesting idea to lend money from your emergency fund to friends or family. Most people wouldn’t recommend something like that since that has the potential to really sour those relationships if they money isn’t paid back promptly. Personally I don’t keep much of an emergency fund, but I have a plan involving various forms of credit to cover any emergencies with minimal interest charges. I figure that interest will be lower than my money would make while invested.
Great advice. Perhaps it’s good to take note about necessary maintenance routines for each equipment in order to avoid more expensive repairs. A blog suggested that the frequency of work needed for each must be included in the estimation of budget.
@ Amy – good idea, I have never thought about taking an inventory of what the necessary maintenance routines are for some of the equipment that we have. I know I just fixed a lawn mower that I picked up down the street that someone had gotten rid of. I cost a few bucks but it was worth it to me to have an extra mower. Plus it was nicer than the 15 yr old one that I had. 🙂 Thanks for the advice!!!!