Funding Your Emergency

Alright people, this is going to be a quick one. You need an emergency fund.

Where is this coming from? Well, I was in an accident yesterday. Thankfully no one was hurt. But it was a frightening experience; one that reminded me of the necessity of an emergency fund.

You never know what's going to happen. Accidents are accidents because they were not intended. You can't plan for them, but you should be prepared for them. What happens if you find yourself unable to work & running low on funds? Unless you have that duck-endorsed insurance, you could be in real trouble. It is yet another reason not to spend more than you make.

Pick an amount that you know you wouldn't miss on a monthly basis, $25, $50, $100. Skip that extra cup of coffee or bring your lunch from home for a couple days, there's $25. The amount you can spare is not as important as putting it away with consistency. Open an Emigrant or ING online savings account and set it up to automatically transfer your savings from your checking account. You don't have to think about it, you don't have to do anything, and you chose an amount you can live without, so you probably won't even miss it.

The next step: Forget about that account.

Until you have an emergency where you need the money you've been saving (and the bi-annual Nordstroms sale does not count), that money doesn't exist to you. It is off limits, out of bounds, locked behind an electric fence. It is there for your own personal rainy day. It is your umbrella. We all know that when it rains, it pours; so get to saving now so when if your rainstorm should flood your life you can keep your head above water.

Want to feel really secure? Aim to have 3-6 months of your living expenses saved. If you're self-employed, double that. It may seem out of reach to have 6-12 months of expenses saved, so don't look at it as needing to save all you spend in a year. Break it down into smaller goals. Save 2 weeks' worth of expenses. Then work to a whole month. Then six weeks, eight weeks, and so on. Break it down as much as you need to get it done.

The key is to start. You have to start. Go now, open an online saving account (if you don't trust online banking open a savings account at your bank; the interest you earn won't be as high, but if that's what you need to do, do it).

What It's All About

It's about money. Duh. Well, okay....the truth is that this blog is about realizing your dreams and living the life you imagine. Practically speaking, it can be difficult to live your dream if you're constantly worried about how you're going to pay the bills. So we're going to approach the dream pragmatically. We're going to chip away at one of the roadblocks that stands between you & that dream of yours. Of course I realize that "the best things in life are free," but that doesn't mean you don't need money to function in this world.

You need a roof over your head, you need heat and lights, and food, don't forget about food. All of those things cost money. You work hard to earn it, but do you realize that while you're working you've already spent some, if not all, of your money? You've likely paid Uncle Sam before you even received your check. If you're in a self-employed position (like me) it could be your responsibility to set aside what you owe the IRS (and believe me, they're not to be ignored). After that you've committed to pay your rent or mortgage. The list goes on.... How much is left? What do you do with what's left? Odds are that you're not saving it.

In 2005, the average American saves -.5% of their income. NEGATIVE .5%. What does that mean? It means that we are spending more than we make. Once we've paid all those bills, we go spend the rest and then we pull out the credit card to spend a bit more. The credit card balance increases and then the bill goes up. The cycle continues: we pay more bills, have less to spend after the bills are paid, spend more on credit, and so on.

This has to change! We can't keep digging our holes deeper and expect to get out of it. So let's get to work on the financial choices we make. Let's arm ourselves with the knowledge to make smart choices.