Money Mishaps: No Emergency Fund
Hi Money Masters!
I’m pretty sure you all have heard the phrase, “Better safe than sorry”. Right? It’s a very versatile phrase, so let’s apply that to our financial life. I want you to pretend that you are lounging at home in your favorite chair, on a scorching summer day, with a cold glass of lemonade. You are thinking to yourself that you are very lucky to have air-conditioning on a day like this. Just as you get up to refill your ice-cold lemonade, you hear the A/C go off. To make a long story short- your A/C is broken and needs to be replaced completely.
This is where the EMERGENCY FUND comes in to play.
It is very important to have an emergency fund. Not having one is considered a Money Mishap so let’s have a conversation:
YOU: What is an emergency fund?
HELEN: An emergency fund is money set aside for unexpected expenses.
YOU: Just how much money are we talking about, Helen?
HELEN: It varies on several factors including family size, income, debt, etc. A two-income household with stable income and expenses should have at least 3 months’ worth of net take-home pay set aside; 6 months for a one-income household.
YOU: But I am working so hard to pay off debt right now. I don’t have extra to put aside!
HELEN: That’s great that you are focused on decreasing debt! You can start small. Really look at your expenses and see where you can save, even if it’s a few bucks a week. If you find a little extra in your paycheck, have that amount automatically go into a separate savings account. You can even go through your home and sell extra clothes, toys, furniture etc.
Don’t get discouraged if your emergency fund isn’t up to recommended levels yet. Something is better than nothing and you will get there in time. Having an emergency fund will give you peace of mind. We all know that life can throw some curveballs at us (i.e. medical expenses, car accident, home maintenance issues) but just put that glass of lemonade down for a minute and swing away!