Life can certainly throw you curve balls now and again. Right? Who would have thought that our country would be shut down for weeks on end. Did you?
Let me ask you this – were you prepared? I mean, were you prepared financially? Did you (do you) have money saved to get you through it all? Or, were you totally stressed out because you did not know how you were going to pay your bills and feed your family?
And, I have found that my shouts fell mostly on deaf ears because no one really wants to save…because spending is much more fun.
Is that you? Is that how you feel about saving? Let me ask you – how did that all work out for you when the store or restaurant you worked for closed? Or when all the venues were closed and weddings were being rescheduled….indefinitely. Or the salon closed for 3 months? Or, your kiddos were all home and you couldn’t work from home at all?
A few months ago my 2 youngest children and their spouses were talking about when would be the right time to buy a house. And since the apple doesn’t fall far from the tree, the subject of an emergency fund arose. How much should be saved and what is that based on? Is it a full month of bills, partial month or what? Everyone had a different idea and thought process.
I helped women budget for the unexpected. I helped women get back on track after a divorce or when they got themselves into financial hot water. Personally, I have lived without a job for 2+ years. We used to get paid 4 times a year. I know what I am talking about and I would LOVE to help you out too.
An emergency fund is money that you use….only in the case of an emergency. I know that sounds fairly stupid and simple but it is a totally different mindset.
There are different types of emergency funds. The 2 most common, and the ones I will explain further are:
What does that mean exactly? How much money should you set aside for your emergency fund?
While 1%-3% of your total home value is suggested for your Repair Fund don't let those numbers scare you. Planning for the unexpected should be viewed as a marathon, not as a sprint. Also, depending your homeowners insurance policy, you may get some, if not all of the money back if you do need a new roof or hot water heater. Your repair fund needs to be large enough to pay for those essential items in case your insurance does not cover it.
Let’s talk about the ‘Repair Fund’ first. I am a firm believer in baby steps and crossing one threshold so you can feel confident that you are making progress. With that said, the 1st emergency fund that needs funding is your Repair Fund. This fund is ONLY to be used for repairs. Maybe you need new tires or the air conditioner just broke, or your refrigerator is on the fritz. How much should you set aside?
I would like to suggest that you start with $1000. Once you have that $1000 set aside then move to the true Emergency Fund.
This is a fund for you to use to pay your bills when you can’t work, get laid off, your hours are cut back or your store closes. I.e. – no or limited income. It is an emergency fund. This is how you put it together:
Paying off debt is very important but not at the risk of not being able to pay bills. I am a HUGE believer in being debt free. On the other hand, having no debt is not helpful if you can’t pay your rent. Hence, the emergency fund.
Do you have any idea what a must vs a want is?
The following are wants….NOT musts:
And if things are really tough, eliminate: unlimited text and phone calls, high speed internet (slower package is best to save money), prepackaged food, name brand food. etc. You might want to consider couponing too.
If you are a parent, this is a complete and total learning experience for your children. When we were without out a job my kids observed us making a budget, sticking to a budget and managing our money well. I have a few articles about Kids and Money too. Beginning with ‘Why You Should Give Your Kids an Allowance (part 1 of 3)’. My kids still budget – and probably always will!
One more thing – if you do need to dip into your ‘Repair fund’ or your ‘Emergency Fund’ you MUST pay it back before you continue with any other spending. It is very important that this step is not skipped.
I sure hope this helps you think a bit differently about your money. Me? I love bossing my money around. I do NOT like my money telling me what to do!
Questions? Let me know – I am here to help. And, do your friend and family a great service – forward this post onto them too. EVERYONE needs an emergency fund.
One last thing – there is a GREAT online budgeting program that I just LOVE. It is a true budget….not a record keeping system. It will hold you accountable for your over spending. Check it out for sure. It is called ‘You Need a Budget’ or YNAB for short. 30 day free trial and great responsive customer service.
Don't let let the circumstances of YOUR life determine who you really are? Choose YOU instead! Not sure how to do that? Let me help!
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