Many people do not have enough money in their bank accounts to pay for a $1,000 car repair bill. I have worked with and talked with so many people that had less than $100 in their checking and savings account. Many had no retirement savings either. I have heard that one out of four people have no emergency savings fund.
We believe in having an Emergency fund for our family. We teach our boys to have at least six months of their total expenses in a savings account. We like to use a Brokerage Account for our Emergency Funds and we invest it in Stocks, Mutual Funds and EFTs. We know if we have to liquidate some funds to pay off an unexpected bill, we could with in about seven days at the most.
Of course, no place is safe and no investment is safe. Any Investment can go down at any time. Some Financial Coaches or Advisors may feel that you should keep the money in a well know Bank and not in stocks. That is fine for them, but for us we believe in the Market. You need to make your own decision with what amount of risk you can accept. That is where a Financial Planner can help you out with options and making your choice if needed.
Remember this show is for entertainment only and you should seek advice from your Financial team if you have any questions on Investing. See my Disclaimer on MillsWay.com. I want to help you prepare for an unexpected bill so you don’t go into debt paying on a bill. I want everyone to live Debt Free and reach their Financial Freedom goals.
So, if our monthly expenses average about $3,600 per month then we need to have saved $21,600 in our Emergency Fund.
If we know we have some big expenses coming up in the next year or two we will build up our Emergency Fund account to cover those expenses also. For example, if we need to buy a used car next year and we feel it will cost us around $10,000. Then we will need to build up our Emergency Fund account to $31,600.
Here are some examples of Emergency Expenses that can come up and if you don’t have the money saved for them then you could go into Debt.
- Lost your Job and you are out of work for months whole looking for a new job.
- HVAC system goes out in your house and you need a new one.
- You Roof is bad on your house and you need a new one.
- Your Car is on its last leg.
- You have a Medical Emergency and Insurance won’t cover it all.
- You are hit with a big Tax Bill.
- Your Kids have an Emergency and needs some help. (Optional for Adult kids of course)
- Your Son throws a baseball through the neighbor’s front window and you have a $1,000 deductible on your home owners policy.
- Your Son wants to go on a School Trip to Peru.
These are just a few examples and I am sure that you could come up with a lot more. Just think back in the last two years the large expenses that came up for you that wasn’t planned on.
Just like the other day when I needed new tires for one of our cars. A lot of people would have to charge $500 to a Credit Card because they wouldn’t have the funds in their account.
Years ago, I had a married couple that didn’t have enough money for a car battery that died. They had maxed out their credit cards and couldn’t get any new credit cards because their credit score was in the toilet. They were going around to their friends asking for $100 or what ever they could loan them towards a new battery. They needed the car to get to their jobs thirty miles away. Their money problems went much deeper for sure than not having an Emergency Fund.
Building up your Emergency Fund is Action Step 6 in the Mills Way to Financial Freedom Action Steps. Action Step 3 is to save $1,000 Emergency Fund until you attack your debts.
You may be asking why not till Step 6? Because first you need to get your Mind to want to be Financially Free, your Mind needs to want to achieve your Financial Freedom goals and your Mind must be driven to take the necessary Steps to achieve it without ever quitting.
After your Mind is set you need to create a Budget to get their and then attack your debt. It would be hard to ever build up an Emergency Fund if you aren’t spending less than you make.
This is hard for some people to do. For instance, the couple with the Car Battery had a lifestyle that they felt was more important than having Financial Freedom. They choice to continue to Smoke Cigarettes, Drink at Bars, Bowl in leagues, go to Casinos and more. They didn’t have their Mind set to do something different. They didn’t want to get help from a Financial Coach. They just wanted to get a battery and make it till next paycheck.
Some times that next paycheck doesn’t come. I have worked for a company before that had a cashflow problem and was weeks behind on pay. I have some friends that went to work and the doors were closed for good. They were out of work for months.
That is why an Emergency Fund is so important for the unknown events. Do you have an Emergency Fund? If so, is it enough?
Teaching your kids about having an Emergency Savings Account is important we feel. Like Proverbs 22:6 NIV said “Train up a child in a way he should go; and when he is old, he will not depart from it.”
Here are two positive quotes I like; “There is no way to happiness; happiness is the Path.” By Buddha
“Change Your Thoughts – Change Your Life” by Wayne W. Dyer
Let me know your thoughts about this blog and let me know of others you would like me to do in the future. I feel we can all learn from each other. That is why I am in the helping people retire early, enjoy life more and be more successful. Also, please see my Disclaimer page.
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