Can you handle a $2,000 emergency? That question came up on a survey I was working on. I’m happy to say, I answered Yes!
It got me thinking about how more than half of Canadians are $200 away from being financially insolvent! It’s mind boggling that half the population are within $200 of not being able to pay their bills. How will half the people out there come up with $2,000 in an emergency?
Ladies, we don’t want to be in that position. Especially if we’ve already been there. Let’s not go back there again.
The things we need to do are bust debt and save money. Once we slay the debt, that’s a huge relief and one less thing for us to worry about paying. If we have money saved in the bank, that takes stress off us if an unexpected expense comes along.
We can handle it!
Click here for more tips on how to bust debt and save money.
HOW WILL YOU HANDLE A $2,000 EMERGENCY?
In my post Nobody Cares More About My Money than I Do, I talked about reasons you might need an emergency fund. I also gave a list of what is not an emergency.
The car breaking down, the basement flooding, a broken tooth, a sick dog goes to the vet, and appliances that need to be replaced are all emergencies.
Buying clothes and jewellery – not emergencies!
If you have a $2,000 emergency, what’s your plan for paying it?
- Take money from your savings account.
- Use your credit card.
- Borrow money from a friend or family.
- Take out a bank loan.
- Apply for a line of credit on your bank account.
Start thinking about this. Can you handle a $2,000 emergency?
If your credit card is your emergency plan, is it a zero balance?
If you have at least $1,000 available on your credit card and $1,000 in your bank’s emergency saving account, you can use a combo of both to come up with $2,000.
See this article about how only 40% of Americans can afford to pay a $1,000 emergency bill.
That’s a one thousand dollar emergency. I doubled the amount!
But let’s not stop there. Let’s move into scary territory.
CAN YOU HANDLE A $20,000 EMERGENCY?
Yikes! A $20,000 emergency!
It happens. A trip to the hospital. Surgery. Unemployment. Car accident. Replacing a roof.
Let’s go back to the same question above. How will you handle a $20,000 emergency? The answer is probably the same.
- Take money from your savings account.
- Use your credit card.
- Borrow money from friends or family.
- Take out a bank loan.
- Get a line of credit.
Or various combinations from that list.
MOTIVATED BY FEAR
Ask yourself what’s the worst thing that can happen if you can’t scrape together $2,000 for an emergency.
Is it losing the place where you live?
What about being in pain because you can’t afford a root canal?
Let’s not dwell on bad things that may or may not happen.
Instead, get motivated to make sure nothing bad happens.
Get focused on how that $2,000 emergency will be handled.
For me, I find the best thing that motivates me is fear.
STARTING AN EMERGENCY FUND
We have to start somewhere when it comes to building an emergency fund.
If you have a safe place in your house to stash money, you could keep it at home. If you have willpower problems and think you might take it and spend it, then bad idea. Open a savings account. I recommend a credit union with a no-fee account. You’ll make a tiny bit of interest on it. Right now it’ll be something like half a percent interest it you’re lucky!
Is there a $5 bill in your wallet when you’re opening your savings account? There’s your start!
Now you need to build your emergency fund to $1,000 as fast as you can. Throw any extra money into your emergency fund. Slash any unnecessary expenses until you’ve got your emergency fund where you want it. That means skipping coffee shops, donuts, candy, booze, high end groceries, cable, mani/pedis, eating out, and anything else you can think of.
You’re uber focused! You’re motivated by fear!
It’ll be a huge relief once you’ve met your goal of saving $1,000!
KEEP BUILDING YOUR EMERGENCY FUND
When you’ve got momentum and watching your bank account increase – keep going!
Once you’re reached $1,000, keep putting money into your emergency savings until it’s doubled. So let’s do that. Double your money at least a couple of times. Your emergency fund might need to hold $5,000 before you can breathe a sigh of relief. But don’t stop there, because you just know something bad is going to happen to your car or your teeth.
Take an extra job delivering pizza or some other food delivery company. This is something you can do! You can control your spending and finding extra money to put in your emergency fund.
Once your emergency fund is over $2,000, you want to keep it in a high interest savings account and that will probably be an online bank. It’s tougher to access those funds, so you’re not going to be tempted to dip in for that new couch you want to buy. Nope. Not an emergency! If you can’t access the funds immediately, that eliminates temptation.
Keep $1,500 or so in your regular bank that you can access quickly if you need to. Or if you’ve paid off your credit card and have a zero balance, that can become your temporary emergency fund.
CAN YOU HANDLE THAT $2,000 EMERGENCY NOW?
The next time you read an article that asks can you handle a $2,000 emergency – you’ve got this!
No problem!
I’ll leave you with one more suggestion. Once you’ve accessed your emergency fund for that $2,000 emergency, you need to build it back up again.
As most of us have discovered through life experience, emergencies aren’t one off things. Emergencies keep coming back to say gotcha.
The car breaks down. You get a toothache. The dog gets sick.
There’s always another emergency waiting. It’s never a good time to have an emergency, but it’s always a good time to be prepared.
Sure, a $2,000 emergency is going to hurt. Hell, a $500 emergency hurts!
We don’t need any more stress in our lives. An emergency fund with at least $2,000 gives us some breathing room
Do you have an emergency fund?
Published by Cheryl @ The Lifestyle Digs on June 19, 2021.
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