Checks That Could Change Your Financial Life Smart change: personal finance
A savings account with only a few hundred dollars is often enough to break the paycheck cycle.
“Most of the unexpected expenses that people face are actually in the range of a few hundred dollars,” Tescher says.
Most low- and middle-income families earn enough money to cover their expenses, but there is often a cash flow mismatch between when they need the money and when it arrives, Tescher says. This can lead to late fees, bank overdrafts, utility shutdowns, and other unpleasant consequences.
“Then getting out of the mess is time consuming and expensive,” says Tescher. Tapping into an emergency account and then replenishing it can fill these gaps.
Other ways to improve your financial health
Once you have an emergency start-up fund, you may want to pay off payday loans, credit cards, and the like. costly debt, Westley said. The less interest you have to pay on the debt, the more money you have for the uses you choose.
People could also start or increase their retirement savings, either by contributing to an individual retirement account or by increasing their contributions to a work plan such as a 401 (k). Although the tax credit money cannot be put directly into a corporate plan, you can use it to replace contributions that flow from your paycheck.