One in eight Americans cannot afford $2,000 in case of an emergency. If you are one of them, do this

Life has a cunning way of costing you more than you expect. After you pull your car out of the driveway and hit a nail, you might end up charging $150 for replacement tires on your credit card. Or maybe you wake up with no heat and a $500 repair bill to fix your HVAC system.

Situations like this are often unavoidable. That’s why it’s important to save a lot of money for when you have money.

But surprisingly, data from TIAA shows that one in eight Americans do not have enough cash reserves to prepare for an emergency. And that’s a problem. That’s because, ideally, you should have an emergency fund with enough cash to pay at least three months’ worth of essential bills. That way, if you lose your job, you’ll potentially be covered until you get employed again.

If you don’t have a cash reserve for a $2,000 emergency, you likely don’t have a full emergency fund (and if you do, here are your essential monthly expenses). really low). If so, it’s important to increase your savings before the next crisis hits. There are a few ways to go about this.

1. Reduce your spending and deposit the difference automatically.

If you have a deep emergency fund and are financially solvent, there’s no reason to cut back on the expenses that bring you joy, whether it’s a streaming service or a takeout meal. But if you don’t have a three-month emergency fund and are nowhere close to saving it, it’s time to seriously evaluate your spending and find ways to save money right away.

To be clear, you don’t have to commit to spending less for the rest of your life. But let’s say you need to save $6,000 for a three-month emergency fund, but you only have $1,500 so far. It may be helpful to maintain a really frugal lifestyle until your bank account gets closer to at least $6,000.

Once you’ve identified expenses you can cut from your budget, calculate that amount and set up a direct deposit to deposit the difference. For example, if you want to set aside $150 a month, arrange for that amount to be automatically saved in your checking account after your paycheck arrives.

2. Increase your income with a side hustle

Just as it’s not easy to fit a side job into your schedule, it’s not easy to maintain a simple lifestyle. But again, this is not something you have to do permanently. It’s something worth working on yourself until your savings are in a better place.

Think about your schedule and what kind of side hustle you can manage. If you need flexibility, consider continuing to do things that you can set your own hours, such as delivering food or groceries. However, if your goal is to secure a guaranteed income, you can apply to work shifts, such as night or weekend shifts, at a local retail store that will earn you a specific hourly wage.

Remember, the great thing about side hustle income is that it gives you some extra income. Since it’s not allocated to an existing bill, you’ll save everything except the taxes you owe to the IRS (something you’ll definitely want to keep in mind if you’re paid as a freelancer and your wages aren’t deducted). of your income).

It’s surprising, but not shocking, that many Americans can’t afford a $2,000 cost. If you’re in that camp, you need to take it upon yourself to change your financial situation so you don’t end up in costly debt due to major unplanned bills.

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