If it’s not an emergency; don’t break the bank!
This month we have been discussing important topics that touches everybody’s life. There were great conversations ranging from understanding needs verses wants, impulse shopping and the affect it could have on your bank account. Frivolous spending disrupts good behaviors that are implemented to create a healthier financial lifestyle. Another topic of discussion was the importance of making baby steps towards your financial destiny meeting those goals; moreover, taking action, which is necessary for a ‘NEXT LEVEL MOVE”.
This month’s final topic is a very important one. I have been asked to expound on the DNA of an emergency fund. An emergency fund has life producing, financial power to your household. What do I mean by that? Nearly 76% of American households are one paycheck or medical expense away from go under. According to CNN Money (2013) less than one in four Americans have enough money to survive should a financial atrocity strike.
Should any unforeseen event take place such as a job loss, illness or death of a spouse (or significant other) that were the sole income earner; a financial cushion could be the life-line needed to keep a household running. Dire emergencies do not discriminate; they could happen to any household. Below are some steps to take towards being prepared for a real emergency not if, but when it happens.
- Be prepared for serious emergencies – start saving at least 5% of your income NOW! Some people struggle with whether they should calculate the savings from the gross or net. My view is “EITHER” as long as you begin.
- Make it automatic – if you find that you are not disciplined enough to be consistent with putting 5% away each payday; set up an automatic draft and treat it like a bill.
- This could be a hard one – Do not give yourself or anyone else a loan or paid vacation using your emergency fund – Avoid touching your pile of cash unless you have a DIRE emergency.
- Save at least 3 to 6 months of EXPENSES. Some experts says save 3 to 6 months of your income. However, should there be a job loss, having 3 to 6 months of your expenses will cover YOUR EXPENSES; perhaps your income will not.
An emergency fund is a legitimate reason to break the bank when the time comes. Please feel free to leave a comment or e-mail me at christineroebuck@livemylifedebtfree.com.