A subscriber asked me to do a post on preparing for unexpected bills, so here you go!
Angela is standing in the mirror with her right hand rubbing against her throat; she takes a deep breath and swallows slowly. Today her throat is in worse pain than it was yesterday, probably from her wisdom teeth that she’s been avoiding although now she can’t seem to escape the pain.
Luckily her dentist’s office is only 15 minutes away from her job, so she was able to get an appointment during her lunch break. “Looks like you wisdom teeth need to be pulled out, I’m going to give you a prescription to keep your gums from getting infected.
Make sure you take all of the pills and we can schedule an appointment for you to have you teeth pulled out, sooner rather than later. You can set up an appointment at the front desk we should have your insurance on file, if you want to be put to sleep it will cost you more money out of pocket ” the dentist tells her.
The dentist walks out of the room. Angela is still sitting in the chair; she gets up and pulls her phone out her jacket. She enters her passcode into her phone and looks at her background screen saver. A beautiful picture of a beach from the Dominican Republic. Angela had plans of booking a trip to the Dominican republic, but it looks like that will have to take a back seat, thanks to her wisdom teeth.
You see Angela only has one checking account. All of her money is lumped together. She has no savings so her only option is to spend the money in her checking account or add more debt to her credit card.
Unexpected emergencies are bound to pop up one time or another yet many people are unprepared for them when they arise. It’s extremely important to plan ahead for these events.
“Bankrate commissioned Princeton Survey Research Associates International to conduct its Money Pulse survey on budgeting and unexpected expenses. It interviewed 1,000 people December 17-20, 2015, with results having a sampling error of plus or minus 3.8 percentage points.
“The survey shows that a very significant minority of American households apparently don’t have the resources to pay for an unexpected expense of around $1,000,” says Stephen Brobeck, executive director of the Consumer Federation of America….Nearly 4 in 10 respondents, 37%, say they would pay for an unexpected expense with savings, Bankrate’s survey found.” Bankrate.com
Create multiple sub saving accounts
By having separate accounts when an emergency does pop up then you can take the money from your emergency fund, instead of having to swipe your credit card. The credit card that you’re already trying to pay off and now you have to swipe it again to pay for your car, or dentist, or whatever other emergencies that happen to pop up. Which will now push you further into debt?
In order to avoid this whole situation, do yourself a favor if you haven’t already and be sure to sign up for a high interest online savings account and create a sub savings account for your emergencies.
Be sure to open an account that is free or has a low payment. Also be sure to check if there are any fees associated with having the account. (Some accounts charge you if you don’t have a certain amount of money inside them) I have Capital One, but there are a ton of great online banks you can choose from. Check out bankrate.com for a full list!
At Cap One, I’m able to name each of my accounts that way I know exactly what I’m saving for.
How much you should have in this account is different for everyone. Some experts recommend saving 3-6 months of your monthly bills into an emergency account. Others recommend saving 6 -12 months of your monthly bills. Whichever you think is best for you, do it! Just start saving. I’ve written about the top accounts you should have as an adult here.
I know it still sucks when emergencies pop up and you have to pull money out of it, but on the bright side at least you have the money and don’t have to put it on your credit card or delay getting your teeth pulled and be in pain for months because you have to save up for the surgery.
Use your past experiences to help you plan for the future.
I know we can’t predict the future, and that sometimes life just happens however, If you know that the year before you’ve spent a lot of money on your car, or at the dentist chances are you want to set aside some extra money into your budget for these expenses. That way when they pop up, you’re not unprepared and shocked. If you get a large bill upfront you may be able to set up a payment plan be sure to ask about payment options.
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