Picture this, you’re pulling up to a stop light and your call stalls. Or you came home from work one August evening and you find your air conditioning went out and you could fry an egg on your hardwood floors. There are many scenarios that can befall any of us, which is why it is important to have an emergency fund on hand to help you in moments like this.
Unfortunately, according to data from the Insured Retirement Institute, baby boomers in general are relatively ill equipped for financial emergencies like this. Roughly 70% of these older workers have less than $5,000 in easily accessible savings. This means that they’re not only putting their near-term finances in danger, but their retirements as well.
Don’t get caught up in debt
The longer you owe the money, the more you pay in interest. Debt is especially troublesome for older workers for a few reasons:
- If you use your spare cash on your debt payments, that money can’t be used towards your retirement contributions.
- You also risk taking that debt with you into retirement, where it can monopolize a large part of your limited retirement income until you pay it off.
It’s important to have at least three months’ worth of living expenses saved. Ideally, having six months’ savings is the best.
Building your safety net
You would think that baby boomers would have an easier time saving money. The thought is that they would have an easier time saving money since they would be likely to advance in their careers and earn higher salaries than their younger counterparts. At the same time, boomers are contending with other bills, like college tuition or payments.
It’s important to review your budget and see what costs you can cut, even if it’s just temporary. If you have an extra car payment, but don’t need to commute, you can reduce your spending and put that money into your savings account. You could also scale back on dining out or even downgrade your cellphone plan.
The moral of the story is that it’s important for everyone to have a fully loaded emergency fund. If you don’t have one, it’s important to make it a priority. Life happens, and the more prepared you are, the less stress it puts on you.