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Credit Education > Debt Management Help > Saving up to avoid Debt Servicing

Saving up to avoid Debt Servicing

By Janet Lacey
Published: Monday, January 11th, 2010

Emergency petty funds for a long time was out fashioned by credit card account and even by bank savings accounts. When many banks temporarily or permanently closed during the recent recession, many account holders blame themselves for not having a petty emergency fund. Using this technique many people are now reducing the risk of lowering their credit score by not availing their needs through credit cards. Many people are now shifting back to the old style of personally keeping a stash that they can use anytime they need it. This may appear easy since it belongs to the olden days of money keeping, so far many individuals who would want to start saving are finding it troublesome because of debts and other over head expenses.

Surprisingly, keeping an emergency fund does not only mean that the individual will have a personal savings account. Experts have been pointing out that saving up for an emergency is a good start in managing debt.

The rationale is simple; it is a good attitude towards money. Debts are usually incurred because of emergency situations that require monetary expenses. During these situations, for example an accident, individuals who are in need at worst get into high rate loans. In an emergency the deciding faculties of individuals are clouded with the immediate actions called by the situation. If only those individuals that became indebted because of emergency situations have emergency funds they were able to avoid being indebted in the first place.

An emergency fund also equips individuals with their needed allowance to find a new job at the event of unemployment. Saving for an emergency fund appears to be more than just managing debt; it is also a good plan to avoid debts. Particularly during the recession, thousands of employees were laid off because of economic problems. A large sum of those laid off employees find it hard to survive the period where they have no job because they do not have an emergency fund. An emergency fund in preparation for unemployment should be equal to at least three months of savings. Three months of not having to borrow money and being indebted is enough leeway to be financially stable again.

Saving up for an emergency fund as said before is a good attitude towards money. It reduces the possibilities of decreasing an individuals’ credit score because of this same reason. It is a good debt management scheme because individuals will be able to set goals that they have to achieve. The simplicity of saving makes people debt free by making them consolidate their money to fully pay their debts and it also gives people the satisfaction of personal success.

Even credit counselors approve this debt management scheme. Credit counselors prescribe this scheme to those who can still recover financially. Managing debt by avoiding situations that can make individuals indebted is better than to confronting the debt.

Saving up also opens up the possibility of opening up a saving account that has high yields through time deposits and secured savings. Even if saving up needs to start small, patience and discipline of a saver can yield many folds through a debt free life.

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