As a bankruptcy firm, we help people who have found themselves in over their heads with debt file for bankruptcy and get a fresh start. However, our main objective is to help people avoid bankruptcy in the first place.
One of the biggest reasons people end up needing to file for bankruptcy protection is because an emergency occurred and they did not have savings to get them by.
Instead, they might have had to turn to credit cards with high interest rates or, worse yet, pay day loans that only ended up adding to their money troubles.
Therefore, an emergency savings account is one of the best ways to avoid a financial disaster. Many financial experts advise that families should have a savings account containing three to six months’ income, which is much more than most American families have.
In fact, many families in Wisconsin and the rest of the country don’t have a savings account at all.
But the good news is that starting a savings account is possible for most Americans, including those with a limited income. In order to start saving, financial experts advise starting with a small goal and then increasing your savings from there.
One idea may be to start with a goal of saving one month’s worth of income. Then, once that goal is reached, the next goal may be two months’ worth of income, and so on until you reach that idea savings of three to six months.
The director of the Center for Financial Security at the University of Wisconsin-Madison advises that saving can also be made easier by making it automatic. He suggests having a fixed amount, even if it’s very small amount, transferred out of your checking account and into your savings account each month.
Otherwise, he explained, you will forget to transfer money into your savings account and the months will pass by.
These are great tips for creating an emergency savings fund that can mean the difference between staying afloat and sinking after taking an unexpected financial hit.
