You and Your Money: Do This To Stop Using Credit Cards for Emergencies
So I was driving home from the grocery store recently when my old, rusty truck started to make a funny noise. I wheeled into my local auto repair shop where I got the good news: the truck had to be repaired right then and there, and it was going to cost me $350. So my $40 grocery run turned into a $390 day. Yay!
Therein lies a universal axiom: If you own a house, have kids, or drive a car — hell even if you just exist — you’re going to have unexpected emergency expenses pop up randomly, and always at the worst possible times. Welcome to life. Make sure to have your checkbook handy.
Many Americans Can’t Handle Unexpected Bills
Unfortunately, the “Report on the Economic Well-Being of U.S. Households in 2018”, published in May 2019 by the Board of Governors of the U.S. Federal Reserve System, stated that“…many adults are financially vulnerable and would have difficulty handling an emergency expense as small as $400”. Which means that — unless they can borrow from friends or family — these people have no choice but to use credit cards to pay unexpected bills. And if you think about it, the high interest rates these cards carry effectively means that these people end up funding someone else’s retirement instead of their own. Isn’t that a sobering thought?
If you own a house, have kids, or drive a car — hell even if you just exist — you’re going to have unexpected emergency expenses pop up randomly, and always at the worst possible times.
Solution: Be Your Own Credit Card Company
If you are in this predicament, there is a better option: you can become your own credit card company. And it’s easy to do, at least on paper: Put $1000 in the bank, tap into it only when emergencies come up, and then pay it back little by little over time. You could even pay yourself interest if you wanted, on top of the interest that the bank pays you (such as it is right now). You might look at putting this money into an online bank rather than your traditional branch bank, as the former offers much higher interest rates.
Now at this point, I’m expecting that you’re saying “Hey there bright boy, that’s a great idea. But if so many of us can’t afford a $400 emergency expense, how can you expect us to drop a grand in the bank?”
Create Additional Streams of Income
Well, there are a few options for you. For example, in a recent article, I showed how doing 3 simple things right now could help you keep up to $5,424 more of your money per year, if you are an average American. That would create an emergency fund and more.
But there are other options. For example, you could sell some of your old stuff that’s lying around the house on eBay or Craigslist. It might not bring you a lot of money, but you’ll end up having someone pay you to haul your junk away.
Or you could take a temporary job (or a job temporarily) at nights and/or weekends to stock up on extra cash. Lots of businesses are desperate for good, reliable help, like convenience stores, pizza delivery chains, taxi cabs, and package delivery companies. There are also plenty of seasonal jobs available if you Google them. In just a few weeks time, you could easily capitalize your own credit card company.
Now, would this be easy? Nope. Would it be fun? Nope. Would it involve sacrifice? Yep. But a guy’s (or gal) gotta do what a guy’s gotta do, right? At the end of the day, it doesn’t matter how you earn money, because money is money. The alternative is to continue to spiral down the black hole of debt. And debt sucks.
Beyond this, the best way to address this situation is to simply manage your money with the expectation that there’s always something unexpected that’s going to happen to you — both good and bad — that’s going to demand money you weren’t planning on spending. That’s why I live more frugally than most people, because I know that as soon as I spend more money than necessary — WHAM! — there goes the truck again. But as Dave Ramsey says, with an emergency fund in place, you end up turning crises into inconveniences.
Your Ultimate Goal — Financial Freedom
Creating an emergency fund is a small, but important step that gets you closer to financial freedom. And freedom gives you the power to create your own future, rather than having it be created for you. Good luck!
This article is intended for information purposes only, and should not be considered financial advice. Consult a financial professional before making any major financial decisions.
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