Americans Are Struggling With Medical Expenses -- Here's How To Save Hundreds
According to recent research from the Employee Benefit Research Institute (EBRI), in collaboration with Lincoln Financial, 53% of employees who experienced a recent medical event paid at least $1,000 out of pocket, and only 28% reported being very prepared for an unexpected expense of that amount.
The data also found that almost half of the respondents (47%) reported at least moderate financial difficulty due to the medical event. To make matters worse, 44% admitted to having no money set aside for unexpected medical emergencies.
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This is why we consulted with financial experts to determine how you can save hundreds of dollars to build up an emergency fund so that you’re not stressed about handling unexpected expenses that may pop up.
Step 1: Figure Out Your Monthly Finances
Bobbie Harris, a women’s money coach and founder of Bobbie Harris Transformational Coaching, noted that you want to start off by defining what an emergency is, which she believes is something that’s urgent and unexpected. Once you’ve done that, you want to have a clear understanding of your monthly finances.
“It’s important to know what is going in and out, and to know where you are leaking money that is not aligned to what you are trying to accomplish in life," she elaborated.
Step 2: Start Building Your Emergency Fund
Austin Kilgore, analyst with the Achieve Center for Consumer Insights, noted that the goal for every household is to set aside an amount that would cover six to 12 months’ worth of basic living expenses. He shared that these will vary by person and household, but in general, will include costs for housing (rent or mortgage), food, utilities, transportation, insurance and minimum debt payments.
While building an emergency fund will take some time, it’s important that you start with an amount that would make you reach for the credit card, such as a $1,000 unexpected medical bill that hurts many.
Step 3: Automate Your Savings
The experts agreed that you should set up a routine transfer from a checking account to a savings account to eliminate decision-making on every paycheck you receive. You can begin with a small amount and up it when you’re ready. Even if you save just $10 a week, you’ll have more than $500 in a year in your emergency fund.
Step 4: Make a Plan To Eliminate Your Debt
The next step is to create a definitive plan to pay off any credit card debt that’s holding you back. You could start by tackling the debt with the lowest balance, or by paying down the debt with the highest interest rate. The good news is that once you’re out of debt, you’ll have much more money to devote to the emergency fund and to prepare for whatever life may throw at you.
Step 5: Keep Watching Your Spending Patterns
You’ll want to keep on tracking your spending patterns by reviewing your bank accounts to ensure that you’re on track. You can also learn more about how you spend money and identify areas where you can cut back to improve your savings. You may want to use this time to identify leaks so you can redirect those funds toward building an emergency fund. You may determine that you’re spending too much on dining out or that you have a bad habit of overspending on nonessentials.
Step 6: Evaluate Subscriptions
As you build up your emergency savings, you’ll want to review your household subscriptions.
“Many people are surprised to find overlap among family members, or overlap in various bundles of entertainment services," Kilgore said.
If you’re serious about cutting back, you can consider using a local recreation center instead of an expensive gym, using the local library for books and entertainment, and dropping the premium versions of certain apps.
Step 7: Generate Extra Income To Devote To the Fund
The final step is to explore ways to boost your income so you can save more to prepare for potential emergencies. You can look into a part-time job, selling stuff around the house for cash or develop a side gig like online tutoring to help you grow your savings.
Harris concluded, “The key to financial peace is planning and putting money away so that it doesn't have to go on a credit card or you have to take a loan out.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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