“Whatever can go wrong, will go wrong.”
That’s Murphy’s Law and chances are you've heard it before. Though it may sound negative, it's still strong advice — it's simply a good idea to be prepared for anything. When it comes to financial preparedness, however, many of us have room to improve.
In a recent study by The Associated Press-NORC Center for Public Affairs Research, two-thirds of Americans say they would struggle to find enough money if they were faced with an unexpected bill of $1,000. In addition, three-quarters of households making less than $50,000 a year report they would struggle with such a bill.
Even higher-income earners don't appear safe from the burden. Thirty-eight percent of households making more than $100,000 per year report they would have difficulty finding the funds to cover such an expense.
Savings concerns and consumer confidence
While many people aren't prepared to pay such a large unexpected bill, they are able to pay their regular bills successfully. The same research found that two-thirds of those surveyed were content with their finances, a sign they're able to handle day-to-day expenses.
Still, as experts warn, managing the expenses of daily life can fill consumers with a false confidence of their financial stability. That is because in many cases simple day-to-day financial management may not be enough to ward off large, debt-causing expenses. Common causes of such expenses include unexpected life events such as the loss of a job or the costs associated with an emergency medical procedure.
Focused on saving
Take a look at your own expenses. Could you handle an unexpected bill of $1,000? If not, it’s best to heed Murphy’s Law and start preparing for such a thing. Budgeting your home's finances can help. Citigroup recommends looking at your monthly household income and establishing a 50/30/20 rule with 50 percent of your income being set aside for fixed expenses (rent, car payments, etc.), 30 percent being set aside for variable expenses, and the final 20 percent to be set aside for savings.
Now compare this ratio against your income to determine if this is possible for you. Depending on your income, you may have to set aside 60–70 percent of your income for fixed expenses and work down from there. Your initial savings in this ratio may seem small, but any money you can put away will ultimately be helpful in the future.
Getting immediate help
So, what do you do if that $1,000 expense comes knocking before you have time to save for it? Or, what if traditional banks have failed to meet your needs and made saving difficult?
If this happens to you, an installment loan may be able to help bridge the gap in your income. Installment loan lenders can offer short-term loans from $300–1,400 to help you overcome those unexpected hurdles Murphy’s Law may throw at you, at a time when you need help most. After all, when the unexpected happens, it’s good to know you still have a dependable option.