It’s a decision that could have serious implications.
The COVID-19 pandemic has caused a world of financial upheaval for many people. Not only did millions lose their jobs in the course of the crisis, but many of those who were able to keep working still struggled with income loss or added expenses.
One expense consumers grappled with in the course of the pandemic was medical bills — so much so that 53% were forced to take on new medical debt, according to a new surveystyle=”text-decoration: underline”> from Discover Personal Loans. Worse yet, that debt has been preventing some people from meeting their financial objectives. And for 28% of those with medical debt, it’s meant not being able to contribute money toward their emergency savings.
The danger of having an incomplete emergency fund
The purpose of an emergency fund is to get you through a financial crisis. That could mean having to replace a car on a whim, having to cover a massive home repair, or having to pay your bills during a months-long period of unemployment.
Generally speaking, it’s a good idea to have three to six months’ worth of essential living costs available in a savings account. That way, if job loss ensues, there’s money to tap for bill-paying purposes, especially in situations where an employment claim is rejected or delayed.
If you’ve been trying to build an emergency fund but got stuck with medical debt, and you’re now no longer able to contribute to your savings, you may, unfortunately, end up in a tight spot when your next personal crisis arises. It pays to do whatever you can to somehow manage that debt while also funding your emergency savings.
Boosting your income to stay afloat
Maybe you were contributing $200 a month to emergency savings steadily before getting hit with a series of medical bills that are now monopolizing that $200 a month. If your paycheck is maxed out, you may feel compelled to ignore your emergency fund until your debt is paid off. But there may be a way to keep up with those debt payments while continuing to contribute to savings — getting a second job.
Taking on a side hustle isn’t always an easy thing, especially if you happen to have health issues or already work long hours. But if you’re able to make one work, you might manage to chip away at your medical debt while also building yourself a solid savings cushion.
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