What would you do if your car breaks down on the highway, your child or pet gets sick, or a pipe bursts at home? If you’re lucky, you have an emergency fund you can tap to help you with these unexpected expenses.
There are other ways to handle emergencies, as you’ll learn below. But nothing beats a good old-fashioned emergency fund. Find out more about who needs them and how to build one out of nothing.
How to Handle an Emergency without a Fund?
Many Americans turn to the plastic in their wallet in emergencies. You can put an unexpected repair on your credit card and pay off this charge once you get the cash.
But what happens if you maxed out your cards by handling an earlier emergency? A study by Bankrate reveals 1 in 5 U.S. households carry more debt on credit cards than savings.
If that sounds familiar, you can use an emergency installment loan to help you cover unexpected emergency expenses. Online installment loans for bad credit might be available even if you did damage to your credit score by maxing out your credit cards.
Besides your credit score, your location may also factor in how easily you can get an installment loan online.
If you live in Missouri, for example, you’ll have to stick with online direct lenders that are licensed in the state to provide loans. This accreditation proves the lender follows Missouri’s lending laws when setting appropriate rates and terms.
Like any personal loan in Missouri, an online installment loan may vary depending on your employment situation, income, and other financial information, too. But its rates must fall within the law.
What Can You Do to Save More Money?
While online installment loans can help in a pinch, paying for the unexpected out of pocket is the better deal. Your savings don’t come with interest or finance charges, so it’s cheaper in the long run.
So what can you do to squirrel away more cash? Try out these tips.
It can be hard to prioritize your savings if you don’t know where your money goes each month. A budget lays it all out in front of you.
To make yours, track your expenses from the last three months or so. Next, sort them into categories, so you can easily identify overspending you need to address.
A financial rule of thumb says to save as much as 20% of your income every month. This target is much easier to hit when you make these savings before paying anything else. It forces you to save this money right away and work with the rest, ultimately leaving you with less money to spend on splurges.
Once you have an idea of how you’re spending your money, it’s time to change it. You’ll want to cut unnecessary expenses that make it hard to cover bills and the other essentials after you save.
These expenses are often little things that add up to take a big bite out of your budget, like takeout, overlapping streaming services, or social activities. Limit how much you spend on these expenses to free up more cash to put towards a rainy day.
An emergency fund is an important puzzle piece to your financial security. While an installment loan may provide backup, your first line of defense should always be savings. Remember these tips as you build your own stash.