Debt is much more common than you think. Almost everyone has encountered it at least once in his or her life, and it’s nothing to be ashamed of. What is most important is being able to recognize it and address that you need help.
One way to get help is by consulting a not-for-profit credit counselling agency that offers holistic support in all aspects of debt maintenance. The right agency will offer advice on everything from how to spot and avoid credit repair scams to delivering judgment-free credit rebuilding advice through wise credit and money management.
To avoid future situations of financial uncertainty start saving for an emergency fund once you’ve been able to knock off some of your debt. Having a safety net will make you feel more stable in years to come, and as the title suggests, it’s always an excellent idea to have funds available if any sort of emergency takes place.
It takes time and dedication, but you’ll thank yourself later on when you can pay debts off in half the amount of time as it would normally take.
How Much Should You Save?
Of course, everyone’s situation is different. Depending on if you have a family or you live on your own, if there is a beloved pet that may require medical care — there are many factors that can affect how you should consider initiating your emergency fund.
It’s a common belief that a typical person should be able to access six-months of salary at any time. This is incredibly unrealistic for most people, but it can be a long-term goal.
Look at what you earn per month, and think of an amount that makes sense to set aside in a savings account each paycheque.
How to Build the Emergency Fund
Speak with your Credit Counsellor first to gain some insight on what your emergency fund could look like, and consider these ideas.
- The first step is to save one month of living expenses. Sit down and plan out how much your food, entertainment, bills, rent, and so on cost. Work out how long it would take to save that amount, and set aside a chunk of money each month. Even if takes a few months, the point is that you’re working toward a goal.
- If time and health allow, get supplemental income. Are you free on weekends to work a few shifts at your friend’s store? Perhaps you could take on an additional freelance writing or design gig to chip away at in the evenings. It’s hard work, but if you’re able to take on something a little extra, it will pay off.
- Save your tax refund. It might not be possible to save the entire amount, but if you’re able to, do it! After you’ve filed your taxes and if you qualify for a refund, saving it can be a simple way to boost your savings.
Think about the benefits of opening an emergency fund. You’ll feel so much more secure and calm knowing that there are funds available in case something unpredictable happens.
You will get back on track and you can plan for the future.