We don’t have any sort of financial prep done in case of a crisis
Turns out most of us don’t. A recent survey by Oasis Financial — a legal funding company — says two-thirds of us can’t handle basic household needs if we lost our income for three months, even if they have some money saved.
“The survey illuminates the need for Americans to evaluate their finances honestly, with an eye toward the unexpected,” says Ralph Shayne, CEO of Oasis Financial. “Designating a portion of savings for emergencies and learning about safe, alternative financial solutions will help many avoid being left out in the cold if an emergency strikes.”
Thirty-nine percent of Americans would turn to credit cards to cover unexpected expenses in the event of, say, an accident, layoff, or other emergency that would mean a loss of income. Almost 20 percent of us would cash out our retirement savings — if there is even any in there — while 15 percent would just not pay their bills.
Can you even afford to save?
We know, we know, we suck when it comes to saving, regardless of if it’s personal savings, retirement, or a 401(k). So how can we handle saving money if, well, there’s no money to save?
First off, you need to get better about understanding your income, your expenses, and have a solid plan on your debt, credit, and investments — all three of those should be familiar to you.
Learn how to handle your money — because you’re probably making small, but very careless decisions about where your money goes. Are you tracking your money in some form? If you can’t actively see where your income is going, there’s no way you’re going to know how to fix your expenses.
Next, get a financial plan. No matter what your income, having a plan of some kind has proven results. You’ll save more. If you’ve got one, you can work on a savings plan, including an emergency fund and retirement, into your expenses like you would any other bill. If you put away cash like you would any other expense, you’re less likely to spend it on something that won’t have any effect on your long-term finances. (Looking at you, daily coffee stops and fast food runs — those add up!)
Stick to it, your older self will thank you! Many of us are saving — even regularly! — but a lot of us are struggling to set money aside in any form. A third of Americans have even seen a decrease in household income, so it’s no wonder savings is one of the first things to go.
It’s OK, and even encouraged, for you to re-evaluate your financial plan when an emergency comes up, or even on a regular basis to make sure you’re keeping yourself on track. Even though those with a higher income and education find it easier to stick to a financial plan, that doesn’t mean it’s impossible for others to do so.