Did you know that most Americans today are living paycheck to paycheck? Having too much debt to handle is the new normal.
According to a recent report from CareerBuilder, 78 percent of full-time workers live paycheck to paycheck and 71 percent are in debt. To make matters worse, only 46 percent said their debt is manageable while the rest said they are in over their heads.
Americans are not saving, either. In the CareerBuilder report, 56 percent said they save $100 or less each month. Most people are not prepared for extra expenses and emergencies when they come along.
There are many reasons for an emergency fund that covers at least three to six months’ worth of expenses. Job loss can mean you no longer receive a regular paycheck or make less money than you did before. A health or dental expense can be a major burden if you do not have insurance, and even if you do, you may still have to pay a lot of money to cover your deductible and co-payments.
In addition, car and home repairs can leave you destabilized if you do not have the proper funds to cover them. A bigger-than-expected tax bill and unanticipated travel needs are other potentially large expenses that your fund could help cover. And, sometimes you get back-to-back emergencies that need to be dealt with, which may require a significant amount of money and time off from work.
An emergency fund helps stabilize your financial situation so that you do not have to take on credit card debt in order to cover these expenses. With the average U.S. household with debt carrying $15,672 in credit card debt, an emergency fund can help you have a brighter financial future.
Building an emergency fund can help you cover emergency expenses and help you avoid taking on credit card debt. It is the difference between barely getting by financially when an unexpected expense comes up and effectively managing your personal finances.
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