The Importance Of An Emergency Fund
We are back! How do you feel after the last post? If you were surprised after truly looking at your finances, welcome to the club. EVERYONE experiences all of the feelings you felt and they are all normal. So feel them, but don’t let them control you. You have already completed so much by just taking the time to really look at your expenses and see what you spend on each month.
Part 2 of this is really all about having a good foundation. You have your nice list of expenses now and you are probably wanting to get right to making changes and reaching goals. Before we go too fast and you get overwhelmed and quit I want to talk about the importance of really being prepared for life first before diving all in.
You may have heard me talk about an emergency fund before, and that is a savings account used as last resort to cover TRUE emergencies. This account is not to be confused with money for a special occasions or money to treat yourself with, this is for real life emergencies guys.
Examples of true emergencies are ...
Losing your job
Unexpected healthcare costs
Vehicle repairs
Unexpected home repairs like leaks, flooding, heat/AC issues
True emergencies are not things that you could have planned for like oil changes, vacations, yearly fees/expenses, birthdays, and holidays.
I personally have my emergency fund in a separate bank from my normal accounts. I log in to this account occasionally to make sure everything looks alright, but I no longer contribute to it since its fully funded, and I have not had to pull from it yet either. *Knocks on wood* If you have heard of Dave Ramsey, you are already thinking about your $1000.00 emergency fund. I DO NOT believe in a $1K emergency fund unless your total monthly expenses are around $330.00. I personally believe that you need a strong three months saved for your emergency fund (preferably six months but we can rock with three), and it needs to be liquid. This means it needs to be easily accessible cash, and it needs to be stored in a bank. People really do still store crazy amounts of cash at home and that is just not safe guys. An emergency fund also does not come from retirement accounts, stocks, or most investments, so if its not cash you need to start this separate account as well. If you already have this saved, that’s great, make sure it still covers at least three months of your expenses and keep it tucked away. If not, then lets talk about how to adjust your current budget and practices to allow for you to save.
Decrease expenses
Go back to your budget. What are you willing to give up right now? Can you decrease your eating out category, or cancel subscriptions? Whatever money you can save from eliminating expenses from your budget now goes directly towards your emergency fund.
Everyone always wants to jump right to making more money, but decreasing your expenses is a great way to lower the amount you need to cover you for three months OR to make your current emergency fund stretch even longer should you need it.
Increase your income
Do you have a side hustle that once funded your vacations and/or “luxuries” in life? Yep, you guessed it, it now needs to fund this savings account. (We are in the middle of a pandemic, chill on the travel right now anyways!)
Can you sell anything around your home you no longer need or use? This is one of my personal favorites. Offer up, eBay, and Facebook marketplace are all great selling platforms. The saying “one man’s trash is another mans’ treasure” is so true! You never know what someone may buy from you, so snap a few pictures, post it, and get it sold!
I have never personally used these next suggestions for income purposes, but I know many that have and have been very successful with them. DoorDash, Uber, Uber Eats, Postmates, and Instacart are all things you can do after your 9-5 or on the weekends to bring in extra money.
Part time/seasonal jobs. Working two jobs is never fun, but it pays off. If you can have 2 more checks each month that go directly towards your savings goal you will reach it so much faster. You don’t have to work multiple jobs forever, but if you give yourself a short time frame to put your head down and work hard it will pay off in the end.
Having this emergency fund is going to give you some peace of mind about your finances, especially in the world we live in today. With the uncertainty of our economy and more shut downs on the way having this type of money saved for emergencies can help alleviate some of the stress surrounding possible changes to your income.
My best friend says I am only rude to her about her finances, and that I am super nice to everyone else that comes to me for finance advice. My sister also says I am very strict with her money and that I never want her to buy anything. Sometimes I don’t know how I’m still in a relationship with some of the things I’ve tried to push my boyfriend to see with his financial decisions, because sometimes my delivery isn’t the best. But all of these people know I love them dearly and after the first few times of my tough love outbursts they knew I just wanted to see them successful. Now they are all killing it and are holding me accountable just the same, and that is exactly what I mean when I say that I want us all to win. I try not to scare anyone away because I want us all to take better control of our finances, and the social media world has never seen this side of me, but let me leave you with some things that I know I have said to them in the past. Maybe you need some tough love and need to hear some of these too. *inserts shrugging shoulders emoji*
Do you really need that shirt? What’s wrong with the clothes in your closet?
Another happy hour? Do I need to find you some help?
Fine, stay broke.
What did you order from Amazon this week that you absolutely had to have?
That is a really dumb purchase.
You can work harder.
Excuses are the tools of the .... (maybe you know the rest).
I don’t wanna hear it.
Is that in your budget?
I am all for accountability. Let me know if you need this type of accountability partner in your life, I’m ya girl! I’ve had lots of practice according to them lol.
Kayla
