Budgeting For Emergencies

ACCC understands that financial crisis is not always caused by poor decision making, but more often due to events outside of our own control. Sometimes the unexpected, the unplanned and even the unthinkable happen and making ends meet becomes that much harder.

How To Plan For Emergencies

Tornadoes cut a swath across the mid-western United States this spring and took lives, destroyed homes, and crippled entire communities. Thousands in Oklahoma alone found their entire lives turned upside down. A devastating explosion at a Texas fertilizer plant killed 15, injured hundreds and erased 37 blocks of a city. It is also likely that it will put an end to one of the region’s major employers. And the terrorist bombing of the Boston Marathon – which prompted national outrage, a dramatic manhunt and unprecedented generosity and compassion for the victims – halted activity and commerce for days in one of the city’s busiest commercial neighborhoods.

Emotional and physical wounds may take years to heal for those directly impacted by tragedies, but the financial damage will also have long-lasting effects on many.

Nobody can predict or adequately prepare for such terrible circumstances whether it’s a natural disaster, terrorist attack, sudden unemployment, illness or foreclosure. But this page serves as a central location for finding the resources needed to regain control of your financial life in a time of catastrophe. We are committed to helping people live better lives through education and money management. These resources can help get you and your family back on the right track and secure for the future.

Emergency Financial First Aid Kit

While the shock felt by a disaster often seems too overwhelming to bear, there is always hope for the future and coming to terms with change can be accomplished. Operation Hope, in cooperation with the U.S. Department of Homeland Security, has developed an Emergency Financial First Aid Kit as a step by step guidebook for recovering in a time of crisis. For a copy, click here.

Just as important as preparing your home and family for a potential emergency, you should also prepare an emergency fund.

How to Start an Emergency Fund

When it comes to unforeseen emergencies, the best defense mechanism and readiness tool is a household fund established specifically for emergencies and unplanned events. Establishing an emergency fund is one of the first things you should do when striving for financial stability.

If an emergency fund does one thing, it gives you peace of mind. Unexpected financial burdens can hit you when you least expect it. Perhaps you suddenly need to repair the brakes on your car, buy a last minute plane ticket to visit a sick grandparent, or even cover your living expenses while you look for a new job. Whatever the emergency may be, having a cushion to fall back on will help you stay financially afloat while everything else around you may seem to be sinking.

How Much Should I Save?

Guidelines vary but a reasonable starting point for anyone is to amass three to six months’ worth of critical living expenses including:

Bills you cannot put off or defer without serious consequences or complications such as housing (mortgage or rent) payments
Food
Utilities
Insurance
Transportation
Child care
Minimum payments on loans or other credit.

Just about everything else should be considered discretionary expenses and should be the first cut in an emergency financial situation.

If you are having trouble saving because of excessive debt, contact ACCC for help. When you contact our approved credit counseling agency, a certified credit advisor will help you evaluate your current financial situation and provide you with personalized debt solutions based on your goals.

Where Should I Save It?

Once you have decided how much money you need, it is important to save it in an account that is not easily accessible and earns some interest.

Online banks such as Ally Bank and Capital One 360 are a good example of an account that is not easily accessible. They also offer slightly higher interest rates than traditional brick and mortar banks.
If you would prefer a brick and mortar bank you can open a savings account at a bank that is not your everyday bank that is not linked to any of your accounts.
Lastly you might want to look into No-penalty certificate of deposit. Regular CDs are set up to hold money for a certain amount of time. If you pull the cash out before the designated time period is up, you could pay a lot of money in penalties. This makes a regular cd a bad option for an emergency fund, however no-penalty CDs offer better-than-average interest rates and don’t penalize for withdrawing money early. Be sure you read the fine print, so you know what “no penalty” means.

How Do I Build My Emergency Savings?

First, you need to remember that any money you can save is better than none. The easiest way to grow your fund is to automatically transfer 5-10% of every paycheck directly into your savings account. What you don’t ever see, you won’t ever miss. On top of that, try to cut back on unnecessary expenditures. For example, try to pack your lunch or make coffee instead of buying it. If you know you usually spend $30 per week on lunch and coffee, you can now transfer that money into your savings account. Do you have a talent or a passion that can be translated into a side hustle or second job? Use the money you receive from cleaning houses, babysitting, tutoring, dog walking, blogging, etc. to build your emergency fund. Spring clean your garage, attic, and closets and have a yard sale or sell your stuff online.

What Do I Do Once I’ve Reached My Goal?

Congratulations! Now pat yourself on the back and don’t touch the money unless there is an emergency. Revisit your account once a year and consider whether or not you should increase the amount. Take life events like a baby, new house, or higher (or lower) salary into consideration when making the decision.