Many people don’t want to create a budget for their day-to-day lives: they get along
just fine without one, thank you. And who really wants some predetermined spreadsheet ruling their spending decisions? It doesn’t strike spontaneous types as a very fun way to live. I already discussed about Things to Consider When Taking out a Short Term Loan.
Of course, the trouble arrives when we run into emergencies that require large amounts of cash quickly. If you are used to living paycheck-to-paycheck, with only occasional savings binges for gifts or vacations, then having a huge car-repair bill or large co-pay for an urgent medical expense can instantly send you into financial turmoil — especially if you’ve maxed out your credit cards.
It’s sobering to realize how you can go from what on the surface would seem to be a financially-stable position one day, to being on the verge of financial ruin the next. And unfortunately, the kinds of events that sap our resources tend to happen quickly and without much warning, from a medical problem to major car-repair to losing a job and suffering through long-term unemployment.
For who are thinking of taking out a short-term loan, banks and other lenders offer such services for emergencies — and despite the interest rates, this has saved many people the heartache of being unable to afford urgent necessities in time of need.
But while it’s a great relief that short-term loans are available for emergencies, it speaks to the fact that everyone — from the thriftiest among us to the most cavalier spenders we know — needs an Emergency Fund that they contribute to regularly, and that can be accessed for any kind of unforeseen accident or need.
Financial advisers recommend that you contribute small amounts to an emergency fund regularly, and the best way to do this, as indeed, the best way to go about any savings plan, is to automate the process with your bank or employer, so that a preset amount from your weekly or monthly paycheck is instantly funneled into an emergency fund savings account. This makes saving something that happens automatically, rather than something you need to consciously think about every week or month.
Preferably, this emergency fund account that you set up is a stand-alone account, one you are not tempted to dip into during non-emergency situations, and one that is not easily dipped into by being attached to your ATM or bank card. It is of course great to know short-term loans exist, but begin planning for emergencies now with an emergency fund in order to provide peace of mind.