Almost 25% of Americans Can't Cover a Full Month of Expenses With Savings. Do These 3 Things if You Can't, Either
- It's a good idea to have enough savings to cover at least three months of essential bills.
- New data reveals that almost one-quarter of Americans have savings that fall short.
You may need to really focus on building savings quickly.
You never know when you might lose a job through no fault of your own. Such was the experience many workers had at the start of the pandemic, when non-essential businesses were forced to shutter, leaving millions of Americans to scramble to file for unemployment.
The downside of unemployment benefits, though, is that they're not designed to replace your paycheck in full. That's why it's important to have a decent level of cash reserves in your savings account -- not just to deal with job loss, but to deal with all the different kinds of unplanned expenses that can arise, from medical bills to car and home repairs.
As a general rule, it's wise to have enough money in savings to cover three to six months of essential bills, including rent or mortgage payments, utilities, and food. But in a recent report by Morning Consult, nearly 25% of consumers said they couldn't cover a full month of essential bills based on their savings alone. If that's the boat you're in, here are three important moves to make.
1. Get on a strict budget
Having inadequate savings leaves you vulnerable to debt. That's why it's important to boost your savings quickly. Following a budget could make that easier.
Once you set up a budget, you'll have a better idea of where your money goes month after month. And you may have an easier time identifying expenses you can cut back on to free up more money to put in the bank.
There are different methods you can use for budgeting, so feel free to play around with several options and see what works best for you. You may decide to maintain a budget on a spreadsheet, or you may choose to sign up for an app that links up to your bank account and credit cards.
2. Start banking any bonus cash you get
Any extra money you come into during the year can be an opportunity to build your savings. That could include your tax refund, cash gifts you receive as a birthday or holiday gift, or bonuses you get at work. If you have a credit card that gives you cash back on your purchases, that's money you can bank, too.
3. Boost your income with a side job
Perhaps you live pretty frugally and don't spend much of your paycheck on non-essentials. If so, a side hustle could be your ticket to building savings more quickly.
There are many different gigs you can choose from, so ask yourself these questions to land on the right one:
- How many hours a week can I reasonably commit to?
- Do I need a flexible schedule, or can I commit to a preset schedule?
- Do I need a remote gig?
- What's my weekly or monthly income goal?
Keep in mind you can always start out with one side gig and move on to another if it's not a good fit. But running through these questions might help you land on a good choice to begin with.
If you don't have enough savings to cover a full month of essential bills, do your best to boost your cash reserves as quickly as you can. It may take some time, but the sooner you build that safety net, the more protection you'll have in case life ends up throwing you a curveball.
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