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SALT LAKE CITY -- A recent survey shows one quarter of Americans have more credit card debt than in emergency savings.
According to a recent Bankrate.com survey, 25 percent of participants admitted that they have more credit card debt than what they have saved in their emergency fund.
These findings come as a shock to American Credit Foundation Spokesman Mike Peterson, is surprised the problem isn't bigger than what the survey says. According to Peterson, a lot of people he's spoken to use their credit cards as emergency money. When it comes to setting aside an emergency fund, Peterson said too many people feel they won't be able to save enough money.
"Part of the problem with a rainy day fund or an emergency fund is the daunting task of putting something so huge together," Peterson said.
So, what are the most effective ways someone could set aside money for emergencies?
Many financial counselors recommend that someone set aside three to six months' worth of expenses as rainy day money. Peterson knows that sounds like an overwhelming goal for too many people, and he recommends people start slowly. "What I mean by ‘start slowly' is to start with a goal of maybe having a $500 emergency fund set aside," Peterson said.
There are effective ways people can get this process started. Peterson said the easiest way is to arrange your work to directly deposit small portions of your paycheck into a separate account, as when people see the money in their checking account, they're more likely to spend it. He also recommends that people track all of their expenses for 30 days to help them determine what they can stop spending money on.
"Do you have a cell phone and a home phone? Could you get rid of one or the other? Are you paying $80 to $100 a month on cable TV that you could do without for a year or two?"
Peterson says a lot of people burn through 10 to 15 percent of their monthly income without realizing what they spent it on. He had one client who discovered he was spending $200 every month on diet soda. He recommends cutting that unnecessary spending and putting the money in savings instead, reducing the amount one may have to rely upon their credit card for.
