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Why You Need an Emergency Fund

Do you have an emergency fund? NO? Well never fear, because you’re in good company with lots of other Americans. Studies show that 39% of Americans don’t have enough in an emergency fund to cover a $1000 emergency.

Really? Yep.

$1000 isn’t very much. It’s less than most car repairs this day. Less than what it might cost if your dog got bit by a rattlesnake. And less than a medical emergency.

So why do we need one? Well if that last statement didn’t convince you of it, I don’t know what will. Most of us are living paycheck to paycheck, 1 emergency away from financial disaster.

How much do we need to save? Statistically, we should probably have 3-6 months worth of living expenses. Seem like a lot? Well, it’s not in the grand scheme of things, when you without a job, or living in a crisis.

We’d all like to think that friends and family could help us out in times of need. And truthfully, most would like too and would try. But how many of them just wouldn’t be able to help because they too are living paycheck to paycheck?

Emergency funds are for just that, emergencies. They shouldn’t be used for emergency shopping, or emergency vacationing, or even emergency car repairs.

They are funds that are virtually untouchable unless cases of disaster. We should all have a bank account, savings account, emergency account, and retirement account. It seems like a lot of accounts, right?

Hear me out though. If we delegate and separate our money into their respective accounts, and only use those accounts for what they’re intended for, we can save.

It all starts with a budget. And then planning and delegation. If we’re saving 10% of our check for after expenses for our savings account, then the rest should go to our emergency fund. There is a hierarchy of savings, which some will agree and some will disagree with.

If you have debt, my suggestion is that make sure that you’ve at least 2 months of savings for emergencies put away before you attack your debt. I don’t mean don’t pay the debt, but attacking and making large payments to try to pay it down. I believe it’s more important to have something in savings, even if it’s small before you attack the debt.

Some may disagree and say you should pay your debt down first before you invest in an emergency fund, but that just doesn’t sit well with me. I believe you should always have a little in savings/emergency funds before you worry about paying off the debt.

An even faster approach to getting that emergency fund up and running is to get a part-time job, or side hustle.

What we’re trying to avoid is that when emergency or tragedy strikes, we’re prepared to deal with it. Without reaching for those dreaded high-interest credit cards.

Planning now prevents major stress and headache in the long run. It only makes sense to take some easy and necessary steps to prevent panic when something goes run. Check out How to Start an Emergency Fund to learn some easy, simple steps to start that emergency fund today!

7 Steps To Take If You Can’t Pay Your Taxes

So you’ve got a tax bill. Well never fear, cuz lots and lots of people have them too. Maybe you didn’t save enough, or you had an unexpected emergency and used the money for something else, maybe you got audited and you owe more? It’s ok, it happens. One of the 2 things we’re guaranteed in life, death, and taxes! I know all to well the stress that owing to the Federal Government can bring. I’ve been there, heck I’m still paying down my debt from my audit last year. Here are some simple tips to get you thru it.

7 Simple Steps to Take If You Can’t Pay Your Taxes

Don’t Ignore the Bill– First things first, don’t ignore the bill. While many people like to stick their heads in the sand. The IRS will eventually find you. And it won’t be pretty. They’ll access fines and interest to your bill, which will add up. Just contact them and let them know the circumstances, it will go far in their eyes if you’re serious about paying down the debt.
File On Time and Pay As Much As You Can- This sounds simple, but you’d be surprised how many times people see that they owe money, so they just don’t file at all. Don’t do that. Be on time with your taxes, and if you can’t afford to pay the whole bill, send as much as you can with a note. They will be in touch! Being proactive and timely goes a long way with creditors. Shows your intentions are good and you want to be honorable.
Get A Loan or Use Credit Cards– While I don’t advocate for this, it’s certainly an option, although not the best one. Some people are so terrified to deal with the IRS that they are more likely to take out more debt to pay this off when there are smarter choices. Use this as a last resort, if at all.
Ask Parent/Friends For Loans– Again, this wouldn’t be my first choice. I try to make a point to never borrow money from friends, and only reticently borrow from family. While most parents might loan you money without interest, (which is super nice!), often times people are slow and lazy to pay back the parental unit. Which can cause undue stress on all parties. I mean who wants to send their kids to collections??!?
Use IRS Online Payment Tool- This would be my first choice. The IRS understands that many people have tax debt that they can’t pay back at one time. That’s ok, they’ve already thought that way. They’ve got an installment plan program and even a program where you can settle the debt. The installment program is by far the easiest to get enrolled in and they’re very generous in dealing with what you can afford. The settlement program is very in depth and takes quite a bit of time and detail to figure out. Definitely worth it though, if you’ve got a large debt and have a chunk of money that you’d like to settle it with. Probably not worth the time for smaller debts that can be repaid simply.
Look for a Side Job– So whenever we’re strapped for cash, we’ve got options, and one of them is to get a second job, or side hustle. There’s plenty of jobs we can do part-time to make extra cash, including things like Uber, become a virtual assistant, or even babysitting or yard work. Put those extra skills and time to work and make some cash. For more ideas on Side Jobs, check out the TOP 50 Side Hustle Jobs
Sell Off Your Stuff– If you simply don’t have time work another side job, start looking around the house for those things that you no longer need. Electronics, collectibles, antiques, coin collections. There’s plenty of stuff sitting, sometimes in storage, that we simply don’t need or use. For the easiest ways to sell your stuff, check out the 10 Ways to Sell Your Stuff

Not being able to pay your taxes, can be scary and daunting. But never fear, you’re not alone. Plenty of Americans, myself included, have tax repayment plans in place. Being upfront, taking necessary steps, and staying diligent about paying down your debt will go far in the eyes of the IRS. I look at the mistakes I made on my taxes, and subsequent audit as a blessing in disguise. It made me much more knowledgable about my taxes, and I’ve become much better about keeping good records and up to date with my payments. Making mistakes is nothing to be ashamed of, it’s simply a learning curve and a chance to do better. Don’t be afraid to tackle these issues head on, you’ll be much farther ahead in the long run.