Money Management

Do you have enough emergency savings to cover your living expenses? 

Saving is an important financial goal, but many people put off their savings goals because they lack enough extra income. Do you have enough savings to be prepared for potential job loss or other life changes that may occur? A recent Consumer Financial Protection Bureau study found that only about 1 in 4 Americans could cover more than six months of living expenses if they lost their main source of income. This isn’t good news.

Many Americans lack emergency savings

The Consumer Financial Protection Bureau conducted its Making Ends Meet 2022 survey to explore consumer financial health throughout the country. One portion of the study examined whether Americans had the financial means to cover their living expenses if they lost their primary source of income.

Respondents were asked to consider multiple ways of covering their expenses, such as borrowing money, using savings, selling assets, or seeking help from friends or family. It turns out that many Americans are not well prepared for life-changing situations such as job loss.

Here are some notable findings of the study:

21% would be able to cover less than two weeks’ worth of living expenses17% would be able to cover about one month of living expenses15% would be able to cover about two months of living expenses27% would be able to cover more than six months of living expenses

These findings show that many Americans could do more to prepare for emergencies. How long would you be able to cover your expenses if you were to lose your job or experience another significant life change that altered your financial situation?

Start building an emergency fund now

With the rising cost of everyday expenses, it’s no surprise that U.S. households are struggling to prioritize saving for emergencies. Many individuals and families are focused on the now and are stuck living paycheck to paycheck. There’s little or no extra money to save.

But saving for emergencies is essential, even if you can only commit to a small savings goal. Emergencies happen when we least expect them, and they can be life-changing. If you have yet to start an emergency fund, now is a good time to begin.

Opening a high-yield savings account and setting aside a small amount of money regularly will make a difference and get you well on your way to building a sizable emergency fund. Over time, your savings account balance will grow. Plus, you can earn interest.

You don’t want to keep your savings in a checking account because you won’t earn interest. If you don’t have a savings account, review our list of the best high-yield savings accounts to find an account that meets your needs.

Automate your savings to save time and stay on track

Many people want to save but find that life gets busy, and they forget to do it. You may want to automate your savings if you relate to this struggle. You can set up automatic transfers through your bank to automatically transfer money from your checking account to your savings account. You can decide how much and how often you save.

Life is expensive, and it gets busy. But don’t neglect planning for the future. You want to feel confident that you have a plan for life’s twists and turns. Check out our personal finance resources if you need additional money-saving guidance.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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It’s one you should make every effort to avoid. 

For pretty much all of 2022, consumers struggled with rampant inflation. And a lot of middle-income Americans found that their paychecks just couldn’t keep up with higher living costs.

In fact, a lot of middle earners had to cut back on spending to cope with higher expenses. But in a recent survey by Primerica, 47% of middle earners admitted to putting off regular home and vehicle maintenance to deal with inflation. And that’s actually a huge mistake.

The wrong place to cut costs

If money has gotten tight in your world, it absolutely makes sense to cut back on leisure spending like restaurant meals and streaming services. And it’s definitely a good idea to try to find ways to lower your supermarket costs, such as looking out for sales and buying in bulk when that makes sense.

But one area you don’t want to cut back in is home and vehicle maintenance. If you go that route, you might end up spending a lot more money when something goes disastrously wrong. And worse yet, you might end up compromising your safety or having a huge hassle to deal with.

Let’s say you normally have your tires rotated twice a year, but you avoid that this year due to inflation. For all you know, you’re driving on worn-down tires that are hazardous because you’re not an auto expert and you wouldn’t know the difference. That’s not a good situation to land in, so it’s worth paying to have your tires looked at, even if it means having to cut back spending in another area to make that happen.

Similarly, if you don’t properly maintain your home, a host of bad things could happen. Say you don’t seal your wooden deck this year because the cost of the materials you need has gone up. If you skip out on that maintenance, your deck’s wood might rot, rendering it unsafe to sit or stand on.

Also, failing to maintain certain appliances, like your heating and air conditioning system, could result in higher repair bills if a major issue comes to a head. Or, to put it another way, a $200 maintenance appointment might spare you a $7,000 credit card bill when your air conditioning system quits and you’re forced to get a new one.

Don’t be stingy with home and car repairs

When your paycheck is no longer going as far, it’s easy to see why cutting back on home and vehicle maintenance might seem like your only choice. But these are two areas where it really doesn’t pay to skimp.

Doing so could cause you a world of hurt — financial and otherwise — so rather than skip auto and home maintenance, find another bill you can cut. Or, try to pick up a side hustle so you can cover the cost of home and vehicle maintenance without racking up debt, or adding to an existing pile of it.

It’s understandable that you may be struggling due to inflation. But failing to maintain your home or car could have serious consequences you’re truly best off avoiding.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Don’t give up on your resolutions. 

For the past two years, I’ve been taking my son to swim lessons at a local athletic club. Last January, the parking lot was so crowded that I couldn’t get a parking space. I asked his swim teacher what was up, and she told me it’s all the people who resolved to work out. And she said not to worry — they’ll be gone by February.

That did happen last year, and I’ve noticed it happening again this year too. And this isn’t uncommon. In fact, if you made any resolutions — including financial ones — you may already be starting to give up on making progress on them.

If that’s happening to you, you don’t have to just abandon your plans to improve your money situation this year. Following these four tips could help you actually succeed at the goals you set for yourself.

1. Make sure your goals are specific and measurable

It can be really hard to follow through with a resolution if you don’t have a specific action plan. So, make sure the objectives you set for yourself are detailed. For example, if you resolved to “pay down debt,” go back and modify that resolution to be more specific. You might resolve instead to pay an extra $150 a month on your credit cards.

The more specific and detailed you can be, the more likely you are to actually accomplish your resolutions since you’ll know what to do and whether you’re doing it.

2. Be realistic in your resolutions

If the goals you set for yourself are impossible, you’re inevitably going to give up. So, don’t make your objectives too much of a reach. If it feels really hard to pay off an extra $150 a month on your credit card, revise downward and commit to paying off an extra $50. Yes, you won’t make progress as quickly — but at least you’ll be doing something to improve your situation. And if you stick to it all year instead of giving up, it will make a bigger impact.

3. Choose a goal you actually care about

If you aren’t excited about your financial resolutions, it’s easy to abandon them. So, pick something you’re passionate about. If you aren’t super excited to pay down debt, then maybe resolve to save up the money to pay for your next vacation in cash rather than putting it on the credit cards. You’ll still end up better off by not digging yourself deeper into the hole — and succeeding at one money goal is better than failing at a “better” objective.

4. Enlist an accountability buddy

Finally, get someone to hold you accountable for your resolutions by doing regular check-ins. If you know you need to report your progress to your partner or friend, you’re less likely to slack off on accomplishing the resolutions you’ve made. Plus, it’s more fun to work toward a goal if someone is cheering you on.

By following these four tips, it’ll be easier to ensure your resolutions are something you stick to not just through January, but for the entirety of 2023.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More