How do you end up in financial distress? There are many reasons, and, when it comes to facing a potential bankruptcy, very often the biggest triggering event is a medical crisis or a divorce. But there are smaller factors that can add up to your finding yourself in a big crisis. This is the fifth in a series on what one bankruptcy attorney identifies as the “Top Ten Personal Financial Mistakes” people make. His list is useful for all of us to review and consider, and his posts link to helpful resources available on the web. Be sure to click on the link below to his post and check out the resources he provides, too.
The biggest mistake anyone can make is failing to have an emergency fund. When you don’t have even the smallest amount put aside for an emergency, any unplanned expense can start the ball rolling to financial ruin. Whip out the plastic and pay for the failure to save for the next ten to twenty years.
Some experts (and talk radio hosts) suggest that you start with a small emergency fund of $1,000.00. This sum may not be easy to save, but it is a start. By no means should this be the end of your savings.
Just like your debt can mushroom while you aren’t looking at it, so, too, can your savings. Start even with a small amount, e.g., $5 or $25 a pay period automatically transferred from a checking account to a savings account. Out of sight out of mind applies to savings — what you don’t see you won’t think to spend and it can grow for when you need it. Just think — maybe you won’t have to borrow on a credit card if you can pay it from your emergency fund!