Saturday, 9 February 2019
Living paycheck to paycheck. It's a term being used to describe Federal employees who have been furloughed without pay during the ongoing government shutdown, but the fact is, many Americans would find themselves in the same boat if asked to skip a paycheck or two.
Living paycheck to paycheck simply means you are using most or all of your monthly income to cover your monthly expenses -- with no money left over and no money in savings. Based on that, it's easy to imagine how common it is.
Only you can answer this question. If you are spending your entire paycheck to cover monthly expenses, you may find yourself close. Other factors to consider:
If your savings runs out, what is your next step? Could you borrow money from family or friends? Would you be able to take on the added debt -- and the added interest -- if you needed to use credit cards or revolving loans to pay expenses until things return to normal? Having answers to these questions will definitely make you more confident in handling a potential financial emergency.
According to TITLE NAME, one of the biggest stressors during a financial crisis is the unknown. While you can't always anticipate how long your financial situation will remain in turmoil, you can take steps to ensure you are ready to respond:
Start saving now. It doesn't have to be a lot each month, but just getting started is a great first step. If you have the option, set up a direct deposit to a separate account. By paying yourself first, you eliminate the possible temptation to skip a deposit or two.
Pick the right place to save it. Keeping a certain amount of your savings easily accessible is a critical part of your emergency response. Investments and retirement accounts are a key piece of your overall savings plan, but they take time to liquidate and sometimes come with penalties. Look for demand deposit options like money market or traditional savings accounts that let you access your money whenever you need it.
Leave it alone. Your emergency savings should be set aside for just that: emergencies. If you are also saving to buy a car or make a downpayment on a house, consider opening a separate account for those savings goals. This will ensure you have the money you need when you need it.
Protect your credit. While this isn't a savings tip, it is always a good idea to keep an eye on your credit score and do what you can to maintain it. Good credit can be a big help if your financial situation requires you borrow money or use credit cards to cover monthly expenses.
Though it may be impossible to protect yourself from unexpected financial emergencies, you can take steps to make sure you're better prepared. Look for opportunities to build and protect your savings, so you can remain in control of your financial future.
For more information on the savings options available at BBVA Compass, click here.
The content provided is for informational purposes only. Neither BBVA Compass, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA Compass or any of its affiliates.
Links to third party sites are provided for your convenience and do not constitute an endorsement. BBVA Compass does not provide, is not responsible for, and does not guarantee the products, services or overall content available at third party sites. These sites may not have the same privacy, security or accessibility standards.
So you scored a windfall! But now what do you do with all that hot cash? Vacation? Pay debt? Maybe both.
Learn to save for big purchases, large expenses, and avoid taking on monthly payments you can't afford.