Are You Financially Fragile?
Are you familiar with the phrase ‘financially fragile?’ It’s a phrase economists use to describe people who would not be able to pull together $2,000 in cash within 30 days. A study conducted by the National Bureau of Economic Research shows that more than a quarter of Americans fall into the financially fragile category. Even Vice President Joe Biden recently made headlines for declaring he didn’t have an emergency savings account ready to go.
While $2,000 in cash sounds like a lot of money (and it is), it represents what many people typically need in the event of an emergency such as major car repair, unforeseen medical bills, or mandatory home repairs.
If you’ve suddenly realized that you’re financially fragile, there’s no need to panic. But you need to start saving immediately to reach (and exceed) that goal of having $2,000 in emergency cash. Here are some ways you can do it.
Get a Second Job or Pick Up Extra Hours – Remember when you were a kid and you’d ask to do extra chores to make money above and beyond your regular allowance? This is the grown-up version of that. Working a part-time or weekend job for a few months and putting all your pay toward your emergency fund will make it grow quickly. Or if you have a chance to pick up extra hours at your current job, do it. Just be sure any extra pay goes toward that $2,000 goal.
Liquidate Your Assets – This is really just a fancy way of saying ‘sell some stuff.’ Whether you have a yard sale, sell items on Craigslist and eBay or through consignment shops, you can cash in by selling things you no longer want, need or use. Look around your house for unused sports and fitness equipment, clothing with tags still attached, electronics – even your old cell phones. Just about anything in new condition or good working order has resale value. Deposit all the proceeds from what you sell into your emergency fund.
Cut Back on Expenses – Challenge yourself to a few months of personal economic austerity measures and put the money save toward your emergency savings goal. For starters, minimize dining out, take your lunch to work and skip the coffeehouse coffee every morning. Another great way to save is by switching to a streaming video service rather than paying for cable. You can also start using coupons and money-saving apps when you shop for groceries and household essentials. And if you’re really feeling ambitious, start making staples like bread and yogurt from scratch.
Keep Your Eyes on the Prize – Remember that everything you’re doing is to help you reach your $2,000 emergency savings goal. The extra hours might be tiring and you might get bored with packing a lunch every day, but it’s all to give you the peace of mind you need to remove yourself from the financially fragile category. You can do it!