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Building an Emergency Fund in 2024

The other day, I stumbled upon an article from Fast Company titled: "40% of Americans are worried about financial stress in 2024"

The survey highlights that 1 in 3 people said that they are worse off financially than they were in 2022. And what's driving this trend? You guessed it: soaring interest rates and inflation.

 Fidelity Investments 2024 Financial Resolutions Study

Source: Fidelity Investments 2024 Financial Resolutions Study

Over 30% of those seeking loans are simply trying to cover basic bills, while almost 20% are looking to consolidate high-interest debt. It's clear that the rising costs of essential expenses are significantly impacting people's financial well-being.

According to the survey, the need for loans spans across all income levels, including those earning six figures. This tells me one thing: not enough people have an emergency fund.

Emergency funds aren't just for unexpected car repairs or accidents while rollerblading. They're crucial during times of inflation too.

ConsumerAffairs reports that consumer prices for all items surged by 6.4% from January 2022 to January 2023, with even higher increases in food, shelter, and energy prices. Fuel oil prices, for instance, shot up by 27.7%.

This isn't a situation I want you to find yourself in.

Imagine facing both skyrocketing consumer prices and an unforeseen medical expense. It's a double whammy that could worsen an already challenging situation.

So, what's the solution?

It's time to take a close look at your budget and make necessary adjustments. While indulging in $300 monthly massages might be tempting, now might be the time to distinguish between wants and needs and prioritize building a robust emergency fund.

If you don't have an emergency fund yet, aim to save as much as possible from your monthly income until you have 3-6 months' worth of essential expenses covered. For instance, if your necessary expenses amount to $3,500 per month, aim for an emergency fund between $10,500 and $21,000.

But how do you decide between 3 months and 6 months of expenses? If you're part of a dual-income household, 3 months might suffice. However, for single-income households, aiming for 6 months could provide greater security.

I understand that saving might seem daunting, especially if you're drowning in credit card debt or living paycheck to paycheck. But living below your means is key. It's about delaying immediate gratification to secure your financial future. Also, find ways to create more income streams, whether that is from a side hustle or building/buying a business.

And where should you save this money?

Consider a high-yield cash account like Betterment's. Unlike traditional savings accounts, which offer paltry interest rates, Sofi's account offers a competitive rate of return, currently at 4.60%* APY.

How do you open a High-Yield Cash Account? Let's See!

  1. Click here to get to Sofi’s website.

  2. Click the blue button that says “Get started”

  3. Click on “Save with a high-yield cash account”

  4. Enter your email address and personal information

  5. Deposit money

Furthermore, Sofi's account is FDIC-insured for up to $250K, providing peace of mind and security for your savings.

In times of inflation, it's crucial to ensure that your money retains its purchasing power. By leveraging Betterment's high-yield cash account, you can stay ahead of the curve.

So, let's take action. Start building your emergency fund today and consider saving with a high yield savings account.

*The standard insurance amount of $250,000 per depositor, per insured bank, is provided by the FDIC and is subject to FDIC requirements.

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