If you're starting
to find the jokes about the economy less than funny - "Inflation is so high,
rapper 50 Cent has changed his name to 75 Cent" - you might be worrying about
how you and your personal finances will fare if the economy continues a
downturn. The good news is that by thinking about economic uncertainty, you're
already on the right path.
Economists have
told us for years that we should try to save about 3 to 6 months' worth of our
wages so that when the economy is down and money is tight, we won't have to
turn to credit. Using credit as a safety net is a mistake that often takes
people years to reverse. So, preparing an emergency fund now, before the
economy worsens, is the most logical plan. But logical doesn't mean easy. And
if you haven't started saving, you aren't alone. In fact, nearly one-third of
Americans have less than three months of living expenses in savings, and almost
one-quarter have no emergency fund, according to a survey by Bankrate.
An emergency fund
is crucial when you prepare for a downturn in the economy. In a nutshell, an
emergency fund is money you've saved up for the sole purpose of helping you get
through your day-to-day living during financial hardships. And when it comes to
deciding where to store your emergency fund, it's important to make sure the
money is easily accessible in case you need it for unplanned expenses such as a
medical bill or household repair. Your primary goal should be to keep your
money fluid and safe.
A high-yield
savings account gives you easy access to the funds while also earning some
interest. If you already have a savings account, establishing a new one, just
for emergencies is advised. A second account not only will help you resist the
temptation to dig into emergency funds, but it will also help you keep your
money organized and prioritized, without disrupting your previous savings
goals. Some experts advise you take the three-bucket approach to saving -
putting emergency savings into three different accounts and accessing them in
this order, if you need to: a savings account, a money market account, and a
one-year certificate of deposit.
Meanwhile, like it
or not, it might be time to think about ways to prepare for a financial crisis.
Yes, you might need to start living a little bit more frugally. You can start
cutting costs by delaying a major purchase or getting into bargain shopping.
(Thrifting is cool, right?) You may want to think about chopping one fixed cost
from your monthly budget. (Do you really need to subscribe to all those
streaming services?) And yes, like it or not, 'tis the season to be
conservative. (Homemade gifts for everyone!)
Regardless of what
is on the financial horizon - don't lose your sense of humor over it. Prepare,
don't panic. And hopefully, you'll have the last laugh.
Explore all the
savings options available at Telhio by visiting https://www.telhio.org/personal/savings
and https://www.telhio.org/money-market-special.
