If you went home today and found soaking wet living room because a pipe had suddenly burst, would you have the money to pay for it? Odds are you won’t, which is common for most households. Though most homeowners are aware that home repairs and other disasters can occur with no warning, most of them are not financially prepared to handle it if something should happen. This is a major problem. Unfortunately, it leaves them with few options for getting the matter resolved, which pins them between going deep into debt and leaving the problem unresolved (which can create more damage and bigger repair costs later).
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You Need an Emergency Savings
Emergency savings provide an efficient solution for preparing for those mishaps at home. It is an account that is created specifically for unforeseen circumstances. The savings will only be used if there is a household emergency that your normal budget cannot cover.
How to Create One
Now that you know how beneficial an emergency fund can be, let’s learn how to create one.
Understand How Much You Need – In order to budget for something, you need a general idea of what it would cost. So, start by listing common household emergencies and doing some online research to get a general idea of how much they would cost to fix. The highest home emergency cost is the number you’d use as a savings goal. So, if the largest home repair was going to cost you $10,000, then this would be the number you’d need to save up to. Some common emergencies might include:
- Pest Infestation – Pests in the home create chaos. If your home becomes overrun with them, it can cause property damage, health issues, and thousands of dollars in repair. It would be best to have a location-based serviced provider like Joshua’s pest control Kansas City on call to resolve the matter.
- Plumbing Emergencies – You may be able to unclog a toilet or sink, but if a pipe bursts or the septic tank backs up, you’ll need a plumber.
- HVAC Problems – Your heating and cooling systems will eventually break down and need repairs. Without funds in the bank, keeping comfortable in extremely hot or cold temperatures is impossible.
- Appliance Repair/Replacement – As the appliances in your home get older, you’ll need to have them repaired or replaced.
These are just a few of the emergency services you might need for your home. Continue creating a list, remembering to include everything from the foundation to the roof.
Open an Account – Your emergency savings should be separate from any other account. You should open a new account that will be used exclusively to hold your deposits into the account. Setting up automatic savings plans and linking your savings to your checking is a great way to start building that account.
Determine a Monthly Amount – How much can you presently afford to put into a savings account each month? How many months would it take you to get to your goal? Remember, the faster you get to this goal, the more equipped you are to handle an emergency.
How to Fund It
You’ve opened your emergency savings and know roughly how much you’d need to cover any emergency repair in the home. Since you probably don’t have $10,000 to just deposit, you’ll need to find sources to fund your account so you can reach your goals. Here are some ideas:
Trim Your Personal Budget – Look at your existing budget and remove any expense items that are not necessities. Try to get it down so that the only thing you’re paying for is housing, groceries, utilities, taxes, health, and car-related expenses. Everything else should be discontinued at least temporarily so you’ll have the cash to add to your savings.
Use Coupons – When shopping for things that you need, you should always look for a discount first. Coupons can be found in the mail, local newspapers, and online. Use those coupons to get savings on things you need including oil changes and groceries.
Pay Down Debts – Sometimes the only way to boost your emergency savings is to start by getting rid of some of your existing debts. Start using some of that excess money to knock those debts out. Then, the money you would have paid to a bill can be deposited into your savings account instead.
Earn More – There are plenty of ways you can earn more money to boost your emergency savings. You can answer surveys in your spare time, sell your junk for cash, do odd and end jobs for neighbors, or start your own side business. All money accumulated from these endeavors should be deposited straight into your account.
You never know when something could go wrong at home. An infestation of mice could leave your home in ruins and cause serious health issues. A broken pipe can cause water damage and mold. A broken HVAC system could leave you uncomfortable in your own home. As most of these things cost hundreds or thousands of dollars to fix, the best way to be prepared is to save for them. Creating an emergency savings account and funding it monthly gives you the nest egg you need to handle the problem without complication.