The sad story is that most Americans can’t. CNN is reporting that 64% of Americans couldn’t come up with $1,000 in an emergency, according to a recent study done by the National Foundation for Credit Counseling.
That’s scary. An $1,000 expense isn’t even all that representative of a real emergency. That figure is a minor fender bender in a parking lot or a new refrigerator. It’s not even the tip of the iceberg for a major medical condition, a natural disaster, or an extended period of unemployment.
According to the study, most of those folks who can’t come up with $1,000 would be forced to put the expense on a credit card, or borrow the money from friends or family. I’m guessing that if you don’t have the money, chances are your friends and family don’t either.
If you’ve ever followed money expert Dave Ramsey, you know that having at least $1,000 in an emergency fund is one of the major things you need to do to get out of debt and achieve financial success. Having that $1,000 starter emergency fund will help you to keep your debt from growing as you’re working to dig your way out of your money troubles.
Many other financial experts say you should have at least enough money saved to handle 6 months of unemployment. Finance guru Suze Orman says you should have at least 8 months.
But how do you get to an 8-month emergency fund when you can’t even save $1,000?
You’re going to have to get tough. You’re going to have to get tough on every single expenditure you make. You’re going to have to start hammering away at your debts and locking up your credit cards so that you don’t dare add a single penny more to what you owe. You’re going to have to squeeze every penny you can from your budget.
It will not be easy. But I can promise you this: When you get that first $1,000 saved, you will feel better about your situation. When your car needs to be fixed, it will sting to take money from your savings, but you will sleep better at night knowing that the repair is paid for and that you will not owe any interest on that repair to a credit card company.
And just imagine how you would feel if you had that 8-month emergency fund in your bank account.
More money won’t solve all your problems. And we all know that money does not buy happiness. But it does offer some security during these tough economic times. And who couldn’t use more of that?