Life is unpredictable. The world keeps changing. Many of us have experienced financial stress during the pandemic, and it’s not over yet. Meanwhile the support many people received in the form of stimulus checks and monthly child tax payments is coming to an end. Now is a good time to consider what resources we’ll have to deal with a financial emergency if one arises.
 
 

Emergency savings

If you are not experiencing an unexpected financial storm at the moment, start putting as much as you can aside while the sun is shining. Any windfalls such as tax refunds, a generous gift from a family member or a bonus at work can be used to boost your emergency savings. This is the first place you should go if you need some financial slack to deal with unexpected expenses or you’re suddenly short on money to manage the day-to-day.

Emergency savings are intended to be used when you need them. We should put away what we can – when we can – so we have money available when something unexpected comes up. Don’t be afraid to use it. The plan is to use this first before applying for a loan or credit card that will add to our expenses in the long run. And then as soon as you can, start putting money back into your emergency savings – even if it is just a little at a time – so it is there waiting for you next time.

 

Retirement and investment savings

Tapping into your retirement accounts like a 401k should be a last resort. You should only consider this after exhausting your emergency and regular savings, reaching out to lenders to request payment extensions, or applying for low interest rate credit cards or personal loans. You could also consider a home equity line of credit if you have that option. If you have done all of this and you still need more financial slack, only then should you dip into to your retirement savings to withdraw the minimum amount needed to get deal with the emergency.

 

Let’s make a plan together

When we’re under financial stress it can be hard to know where to turn. That is why we’re here to help you every step of the way. We’re ready to spend time with you discussing your financial realities and get you on the path to less financial stress. Stop by one of our Financial Health Centers today or make an appointment for a time that works best for you. We’re here when you need us.