Making ₵ents: Saving for Emergencies
Budgeting was the focus of my column last month and I planned to dig more into that this month, but since then, my life had an unexpected speed bump. When an emergency happens, how do we take care of it? Where does the money come from? Do you use a credit card? Do you have adequate savings that can take care of it? Have you planned for the unexpected?
I’m sure we all have at times found ourselves at some stage of our lives with just not enough money for the unexpected. As I recall my earlier years as an adult, I didn’t think about years down the road, a few months from now, let alone next week. I lived in the moment and scrambled when things went wrong. Savings is an integral part of planning and budgeting. When we don’t have any money set aside, that’s when Murphy comes knocking. It always happens that way. Are you prepared for your next emergency? Do you have at least $1000 set aside for when Murphy comes knocking?
Putting a little money aside each month to build the emergency fund is a behavior that can and must be learned. But you can do it. Put savings in the budget and stick to the budget. We need to be better at savings. The Federal Reserve reported in March that savings as a percentage of disposable personal income was 3.7%, down from January’s rate of 4.3%. This may sound good, but it’s not. This amount is taken from what is left over from your paycheck after your required expenses like housing, utilities, transportation, and food have been paid. We have choices as to what we do with this discretionary money.
It’s important to save. No one knows when the car will break down, the dryer will stop working, or the water heater stops heating water for showers. I’ve experienced all three of these and it’s not fun, but with an emergency fund of just $1000, you don’t need to worry about how to pay for these emergencies.
Return to present day. The news I received had me on a plane to my home state the next morning to see a very special friend that was not going to be with us much longer. Fortunately, for my family, this was easy enough to react to without wondering where the money would come from or how the plane ticket would get purchased. We don’t have a credit card by choice, but we do have an emergency fund (6 months of expenses) that allowed the ticket to be purchased via debit card. I would have spent the whole $1000 to make it back to see my friend. That is an emergency, not some meal I won’t remember next week or shoes that I will eventually get tired of in a few months. Re-evaluate and execute to have a real emergency fund if you don’t already, it makes the emergency much more tolerable. Happy saving.
Kate Rhoten is a financial expert of what to do and not do with money as well as owner of 4 Walls Financial, A Coaching Focused Company. She has attended and completed Dave Ramsey’s Counselor Training. Follow Kate on Twitter @4WFCoach, reach out to her via email at firstname.lastname@example.org or visit www.4wallsfinancial.com. Feel free to share ideas or questions for future articles.