The COVID-19 pandemic has changed our lives forever. Declaring bankruptcy became a concern for millions of Americans, especially moving into March 2021 when 43,425 bankruptcy filings occurred in that month, the largest single month of new filing activity since the pandemic started.
An emergency fund is one way you can try to alleviate bankruptcy concerns. Today’s blog from Checkett, Pauly, Bay & Morgan, LLC, explains.
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The Pandemic & Emergency Funds
More than 4 in 10 consumers with emergency funds had to use them during the pandemic, according to Magnify Money. More than half of consumers went further into debt rather than tap into emergency funds because it took so long to build their savings.
How can you be better prepared for financial emergencies in the future?
Tips for Creating Emergency Funds
Set aside at least six months of net income. For example, your take-home income is $3,500 a month. You should set aside $21,000 in case of an emergency.
Emergencies range from a sudden loss of income due to medical issues and job loss to accidents and a change in life circumstances (like divorce).
Save your windfalls rather than spend them. When you receive windfalls, such as an income tax refund, bonus from work, or proceeds from a property sale, save them instead of spending them. This builds up your savings faster, and you can earn more interest.
Reduce your budget. Lower your budget as much as possible. Do you buy that coffee on the way to work every day? How about going out to eat? Instead of doing these things, save that money. Not only does your emergency fund grow, but you’ll also be on a better financial footing moving forward.
How Can Emergency Funds Mitigate Chapter 7 Bankruptcy?
An emergency fund does several things when it comes to Chapter 7 bankruptcy. It can give you a chance to find another source of income before bills pile up. It also offers you time to adjust your budget as needed.
Chapter 7 bankruptcy can be viewed as a last resort after all other options have been exhausted rather than make it your first choice as soon as something happens. A robust emergency fund gives you peace of mind, too.
Related Post: The Main Reasons Why People Declare Chapter 7 Bankruptcy
Chapter 7 Bankruptcy Attorneys at Checkett & Pauly
Talk to the bankruptcy attorneys at Checkett, Pauly, Bay & Morgan, LLC, about some tips to stave off Chapter 7 bankruptcy. Contact our law firm online or call (417) 358-4049 for more information.