December 11, 2020 by Space Coast Credit Union
Some things are like knowing CPR; you hope you never need
to use it, but it’s important to be ready in case of an emergency. The same is true of an unexpected financial crisis. There are simple ways to prepare, including building an emergency fund and being aware of financial options if you find yourself in a tight spot. Whatever tomorrow brings, Space Coast Credit Union is here for you, watching out for your financial interests.
Start Contributing to Your Emergency Fund in Small Ways
The general recommendation is to have 3-6 months’ worth of expenses in a savings account to use in an emergency. If you haven’t started an emergency fund, this may seem like an overwhelming amount of money. To help you save without finding a new source of income, consider simply tracking your current expenses to see where you could reduce excess spending. Once you find those opportunities, transfer the savings into your new emergency fund.
Gather statements from each of the accounts you regularly use so you don’t miss any expenses. It may be helpful to print them so you can cross items off once they’re accounted for. If you use an SCCU debit card for all purchases, you can easily use the budgeting section in Online Banking to categorize your expenses. Click here
to watch our “How to Use the Budgeting Tool” video.
- Necessities - Begin by listing all the expenses you have to pay each month. This will include costs like rent or mortgage payments, utilities, typical grocery bills, transportation costs, loans and medicines. The standard 28/36 rule of thumb says that you should spend no more than 28% of gross monthly income on housing, and no more than 36% on total household debt.
- Leisure - Next, list all your leisure expenses, which are anything you could live without if necessary. These might include subscriptions, hobby expenses, food delivery fees, entertainment, and cable and streaming services.
- Trim the Fat – Ensure your budget follows the 28/36 rule and look to see where you can decrease leisure spending. Then transfer those savings to your emergency fund each month.
Resist reaching into your emergency and retirement funds
if you still have incoming wages and if possible, continue to transfer money to your savings fund.
Pay down debt and pay your bills on time.
Be smart about credit cards.
- Wait for seasonal sales to make big purchases. Some holidays are associated with deals like electronics on Black Friday or Cyber Monday. Additionally, Presidents’ Day weekend typically has deals on furniture.
- Holidays are also a great time to look for car deals. There are typically car deals around Presidents’ Day, Memorial Day, 4th of July, Labor Day, and the end of the year.
- If you plan to purchase a car at the beginning of the year, look to buy a previous year’s model for a better value.
Shopping online is convenient, but don’t overspend and pay your balances. Don’t open new lines of credit just for the promotional deal. Be sure to understand the go-to interest rate once the deal is over, and pay attention to fees like excessive late fees or penalty rates, over-the-limit fees, and annual fees.
Consider refinancing your car loan.
With lower monthly payments, you could potentially save money over the life of the loan. Use SCCU’s Auto Refinance Calculator
to see if an auto refinance is a good option for you.
Consider refinancing your mortgage
to cash out the substantial equity you have in your home. Before refinancing your home loan, evaluate your goals, the cost, the number of years left on your current loan, and other factors. Request a Consultation
to discuss this option further with an SCCU Express Mortgage Originator or use SCCU’s Mortgage Rate & Payment Estimator
Research health insurance options
If You Lose your Job
(The Consolidated Omnibus Budget Reconciliation Act) for temporary healthcare coverage.
Research the best options for rolling over your 401K
to avoid tax implications.
File for unemployment:
Contact your creditors:
- If you find yourself suddenly without work, don’t avoid your creditors. Most creditors are willing to work with you, and they may have suggestions to help you over the hurdle. Keep communication open.
- Reach out to your creditors like your mortgage company, landlord, credit card issuer, or any other company you regularly pay to see what options you may have. It’s much easier to negotiate a plan before you start missing payments.
- Unless your creditors offer a better solution, consider only making the minimum payments on bills until you are back on your feet. This decision should only be made after looking at your situation as a whole.
During times of economic uncertainty, an emergency fund will give you peace of mind should unexpected income loss occur due to job loss or medical crisis. Also, taking charge of your financial well-being can empower you and help reduce the stress associated with negative news in our world and communities. Most of all, take care of yourself and your family. A strong mental and physical state is beneficial to cope with financial stress.