Financial Education Course – Step #3 (Cont.)
We’re on the third step finally!
We talked about emergency funds in the previous post, but to recap, it’s basically a small fund to take care of you if something unexpected happens, like if you get laid off.
I’m writing this in the middle of the Coronavirus. At the time of writing, 40 million Americans have file for unemployment. Imagine the stress they must feel because they don’t have emergency funds!
Some businesses are going to shut down for good in this time, but there’s also going to be businesses that are going to boom. Which position do you want to be in?
How Much Emergency Fund Should I have?
Check out my post “Financial Literacy Lesson 2 – How do YOU Learn About Financial Literacy?”.
In it, we go through “how to calculate “how much emergency fund should you have?”
But to recap, like I said, put away a little money every month. Have it automatically withdrawn each month.
Invest a little each month UNTIL you got 6 months covered if anything happens.
That’s what people recommend to do, but I think that 12 months is what we should aim for. Yes, a full year, if you’re anything like me – a risk adverse person.
If I were laid off, I would take shelter in a cheaper country like Vietnam until I figure things out.
What is an emergency fund for?
That emergency fund is to give you time to figure things out when worse comes to worse and you’re in trouble.
Put a little money away, in case you need it, in the future.
It’s there for you.
Emergency Fund Rule #1:
Your emergency fund is only for emergencies. Not for shopping sprees. DO NOT TOUCH UNLESS you’re fired OR your kid is dying.
If you’re dying, you don’t need it because you have life insurance. Hehehe. Just kidding. If you’re dying or you got into an accident, please use it, it’s what it’s there for.
Emergency Fund Rule #2:
If you use it, make sure you get it back to 6 months level AS SOON AS POSSIBLE.
I say 6 months, but really, I HIGHLY RECOMMEND 12 MONTHS.
Emergency Fund Rule #3:
DON’T FORGET RULES #1 AND #2.
EMERGENCY FUND FIGHT CLUB
UNLIKE FIGHT CLUB, YOU TALK ABOUT YOUR EMERGENCY FUND.
You talk about your emergency fund to people; you get them to ask you, “What is an emergency fund?” You’ll feel good talking about it and teaching it because you’re helping someone.
They’ll be grateful for you because one day, because of you teaching them about the emergency fund, you could have saved them (in the future) from a very difficult time.
Conclusion: How much Emergency Fund Should I Have?
So, what did we learn today? We learned:
- We should have 6 months, highly recommended 12 months, of emergency fund.
- You can calculate your emergency fund by following this post.
- RULE #1: Your emergency fund is ONLY FOR EMERGENCIES.
- RULE #2: If you use your emergency fund, build it back up to 6 – 12 months ASAP.
- RULE #3: Unlike Fight Club, talk about your Emergency Fund
All right, that’s all I got for today.
Remember to grab your free eBook, LEVERAGE, on how you can build you emergency fund and MORE here.
Continue sharing your way to success,