10% of Americans Are Flirting With Financial Disaster. Here's Why

Are you one of the Americans putting your future at risk?

Unexpected expenses or a sudden drop in income can happen to anyone, any time -- especially during these uncertain times, with COVID-19 cases spiking across the country. Unfortunately, far too many Americans are completely unprepared for financial surprises.

In fact, recent research from Northwestern Mutual shows that as many as 9% of Americans don't have any personal savings at all. That means close to 1 out of 10 people are one minor blip away from a potential financial crisis.

Here's why it can be so damaging to go without an emergency fund, as well as some suggestions on how to be prepared for calamities.

Everyone needs to have an emergency fund

For the 9% of Americans with no personal savings, financial disaster lurks around every corner, because it is inevitable that something will eventually go wrong. This could be something as minor as an unexpected doctor's appointment with a co-pay, or as major as a job loss or serious illness that necessitates taking time off work.

Unfortunately, without any personal savings, even more minor expenses can be problematic, while major problems can be devastating. If you have no extra money to cover that co-pay, you could find yourself putting it on a credit card. But then you're reducing your future income to pay for it -- and adding interest on top of the unexpected cost. That makes it harder to get by with future paychecks, and potentially leads to borrowing more money for the basics as your limited cash is eaten up by debt payments.

And that's just with a small expense. If something major happens and your income drops or you need to come up with thousands of dollars, you could experience dire consequences. You could miss payments and damage your credit score, or end up so deeply in debt that you can't pay it back. You could even face foreclosure or repossession.

Don't risk financial disaster -- start building your emergency fund today

With so much potential for disaster when you have no savings, it's clear that putting money aside for surprise expenses should be a top priority. Of course, that can be hard to do when you're living paycheck to paycheck.

The important thing is to find a way to get started. While the ultimate goal should be to save up an emergency fund with enough to cover three to six months of living expenses, that's not going to happen overnight. But you can start saving something right now to create at least a small emergency fund.

Take a very close look at your budget. Be aggressive in looking for cuts, which may mean major sacrifices in the short term. For example, you may decide to cut back on all non-essential outings to save on gas money, or to clip coupons and eat inexpensive meals for a bit. You don't have to make these major cuts forever -- just until you've saved a few hundred dollars to start your emergency fund.

After you've got something saved, keep some of your budget cuts in place to build your account. Make more sustainable changes over the long haul.

If your budget truly can't accommodate saving anything for emergencies, look into increasing your income -- at least temporarily. This could mean taking a second job until you've built up some emergency money, selling non-essential items, or even more drastic changes such as getting rid of one of your vehicles. Once you've got a small emergency fund, you can decide if you want to keep going until you've got a hefty savings account, or if you'd rather grow your account balance more slowly. But at least you'll be protected from unexpected expenses.

Ultimately, it may take some sacrifice to build an emergency fund when you don't have much money to spare. But it's important to do it even if it's hard, because otherwise your financial situation could get a lot worse very quickly when something goes wrong.