1 in 8 Americans Can’t Cover a $2,000 Emergency. Do This if You’re One of Them

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Emergency expenses or situations can arise at any time. Read on for advice to follow to make sure you’re prepared. [[{“value”:”

Life has a sneaky way of costing more than anticipated. You might pull out of your driveway, hit a nail, and find yourself charging a $150 replacement tire on your credit card. Or, you might wake up to no heat — and a $500 repair to fix your HVAC system.

Situations like these are often unavoidable. So it’s important to have plenty of money in savings for when they arise.

Alarmingly, though, data from TIAA finds that 1 in 8 Americans don’t have enough cash reserves to cover a $2,000 emergency. And that’s problematic, because ideally, you should have an emergency fund with enough cash to pay for at least three months of essential bills. That way, if you were to lose your job, you’d potentially be covered until you’re gainfully employed again.

If you don’t have the cash reserves to cover a $2,000 emergency, then chances are, you don’t have a complete emergency fund (either that, or your essential monthly expenses are really low). If that’s the case, it’s important to boost your savings before the next crisis arises. Here are a couple of ways to go about that.

1. Cut your spending and bank the difference automatically

If you have a fully loaded emergency fund and are doing well financially, then there’s no reason to cut back on expenses that bring you joy, whether it’s streaming services or takeout meals. But if you don’t have a three-month emergency fund, and you’re not close to having one, then it’s time to do a serious assessment of your spending and find ways to cut corners immediately.

To be clear, you don’t have to commit to a lifetime of reduced spending. But let’s say you need $6,000 in savings for a three-month emergency fund and you only have $1,500 so far. It could pay to lead a really frugal lifestyle until your bank account is at least closer to the $6,000 mark.

Once you’ve identified expenses in your budget that you can cut back on, calculate what they amount to and set up an automatic transfer that allows you to bank the difference. For example, if you’re freeing up $150 a month, arrange for that amount to leave your checking account after your monthly paycheck arrives and land in your savings automatically.

2. Boost your income with a side hustle

It’s not easy to maintain a pared-down lifestyle, just as it’s not so easy to work a side hustle into your schedule. But again, this isn’t something you have to do permanently. It’s something worth pushing yourself to do just until your savings are in a better place.

Think about your schedule and what sort of side gig you can manage. If you need flexibility, you may want to stick to a job you can set your own hours for, like delivering food or groceries. But if your goal is to secure guaranteed income, then you may want to sign up for shift work, such as working evenings or weekends at a local retailer where you know you’ll make a certain hourly wage.

Remember, the nice thing about side hustle income is that it’s extra. Since it’s not earmarked for existing bills, you have the opportunity to save it all, minus what you might owe the IRS in taxes (something to definitely be mindful of if you’re being paid on a freelance basis and wages aren’t taken out of your earnings).

The fact that a large chunk of Americans can’t cover a $2,000 expense is alarming but not so shocking. If you’re in that camp, you owe it to yourself to try to change your financial picture so a major unplanned bill doesn’t drive you into costly debt.

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