The most predictable thing about life is its unpredictability.
An emergency could affect your financial well-being drastically. If you don’t have enough saved or don’t have enough insurance, you could find yourself in difficult circumstances if something bad were to happen. The truth is that many Americans can’t afford an emergency of any kind, not just the big problems in life that crop up.
A Federal Reserve survey discovered that 40 percent of American adults wouldn’t be able to pay for a $400 emergency. Not just that they don’t have the money in cash, but they didn’t even have enough available in savings or a credit card charge that they could quickly pay off.
Close to 27 percent would need to borrow the money. If they couldn’t borrow it, they would try to sell something to come up with the money. Twelve percent wouldn’t be able to cover it at all. In the case of larger health-related emergencies, you can use a tax deduction to help pay for it, but only if it is at least 10 percent of your annual income. For smaller expenses, it‘s hard to imagine how to cope without preparations in place.
For some things, you obviously can’t prepare, but you can try and put things in place just in case. Prepare for the worst, and hope for the best. For example — health insurance. Not having any insurance, means you are at constant risk of medical bills. Even when you are insured, you still usually have at least some bills with a copay or a deductible plan.
Having a no-deductible plan costs more every month but means you have no out-of-pocket costs should you need to use the plan. Healthcare.gov states that last year the out-of-pocket limit for a Marketplace plan is $7,900 for an individual and $15,800 for a family plan. That's a lot of money to have to come up with on short notice.
If you need to start setting money aside, put a strict budget in place and work out where and how you can save. Changing from name brands to generic on household goods could save you up to $1500 every year.
When a government or organization sets money aside for emergencies, they term it a “war chest.” Perhaps it is time to get your war chest ready.
That way, if an emergency does arise, you can conquer it easily.
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