Forget Haunted Houses: This Personal Finance Blunder Is Way Scarier

It's a mistake you really can't afford to make.

It can be fun to get caught up in the spookiness of Halloween -- especially if you have kids who enjoy the whole haunted house concept. But while it's okay to engage in some low-key spookiness this October, there's one personal finance mistake a lot of people make that's downright scary. And if you fall victim to it, you might regret it for years.

The danger of not having savings

A recent survey revealed that only 40% of Americans are able to cover an unplanned $400 expense by dipping into their savings. And similar studies have come out along these lines through the years.

That's pretty terrifying, though. As a general rule, it's a good idea to have an emergency fund with enough cash to cover at least three full months of essential living expenses. And even if you live quite frugally, it's fair to assume that you'll need way more than $400 in the bank to cover yourself accordingly.

In fact, three months' worth of living costs is really the absolute minimum you should aim to have in your savings account. In the wake of the pandemic, some financial experts will tell you that you should really aim to sock away enough cash to cover more like eight to 12 months' worth of bills.

Either way, if you're nowhere close to having a complete emergency fund, you're putting yourself in a really scary situation -- no joke. Without emergency savings, you may have no choice but to instantly resort to debt if you're hit with an unplanned bill you can't cover with your regular paycheck. But once you take on that debt, it has the potential to spiral.

Think about carrying a credit card balance. Credit cards are notorious for charging high levels of interest. If you're forced to charge a $600 car repair on a credit card because you don't have the money in savings to pay for it, that repair could easily end up costing you double by the time you manage to pay that bill off.

Or, think about what might happen if a recession hits next year and you wind up out of a job. While you may be eligible for unemployment benefits, those won't come close to replacing your missing paycheck in full. And without savings, you might really struggle to keep up with your bills and put food on the table.

A big change may be necessary

If your savings account is sorely lacking in funds, let this serve as an important wake-up call to prioritize your emergency fund from this point forward. Set yourself up with a budget that allows you to eke out some savings from every paycheck. At the same time, consider getting yourself a second job to boost your cash reserves if you're someone who doesn't have enough cash on hand to cover even so much as a $400 unplanned expense.

Leaving yourself vulnerable to emergencies could result in a world of financial pain -- and stress. And that's a frightening thought you don't want to contemplate.