An Emergency Fund is Important

40-Forwarders, this week we closeout what I am dubbing the Financial Trifecta. So far we have looked at needing to have a retirement plan (and it’s not too late), and we then followed up with a conversation about paying off our debt. This week my dears, it is all about our Emergency Fund.

Noah preached for 120 years, “It’s going to rain. It’s going to rain,” and no one listened. Older folks told us to, “Save for a rainy day,” but did we pay them any mind? Here we are at the beginning of 2021 recovering from the flood that was, is, and continuing – COVID-19. How is the cleanup going? Are you still feeling the effects? Talk about being caught off guard!

This COVID-19 pandemic has brought home forcefully the importance of disaster preparedness. We have been disturbed, displaced and discombobulated. We cannot afford for a third flood and we are not better prepared financially.

Reasons for Emergency Fund

Your rainy day could be in the form of:

• Job loss
• Serious illness
• Plaquing illnesses that come with age (Talk Truth)
• Death of the bread winner in the family
• Terrible car accident
• Car starts having frequent breakdowns
• Unexpected home repairs
• Effects of a natural disaster

Now we know some of the reasons why we may need an emergency fund, now let us find the funds for our emergency fund.

Finding the Cash for Your Emergency Fund

Truth is 40-Forwarders, we need to stash some cash for those unexpected financial surprises. Without our stash an emergency can be quite devastating.

But Rona V the money is tight, where am I going to get it from? I feel your pain. Let me see if I can help you find those “small amounts” for your emergency fund:

• By now you should be well on your way to tracking your expenses. Take a closer look. Is there something you can cut out or cut back on?
• How about shopping “generic” instead of “name brand”? Put the savings away.
• Are you perhaps in a position to start a little herb and/or vegetable garden? The amount you would spend on these items now goes to the fund. Who to tell, you may have a large enough space to grow enough to sell the excess.
• Look through your home; is there anything you can sell?
• Go on a campaign of unplugging everything in your house that is wasting energy/electricity. Watch that bill go down. More for the fund.
• Sticking with the energy saving plan, make a simple switch by changing out your bulbs, to energy saving ones. Look for energy saving equipment and appliances when you are making your purchases.
• Try this savings challenge – Save the Change – start saving your coins and if you have a savings account consider rounding up your balance and transferring the small difference into your emergency fund account.
• Let’s get back to borrow or barter instead of buying. Put that amount in the fund.
• Tax refunds, bonuses, increase in pay? Put some in the fund.
• Start a side hustle – tun yuh han mek fashion (you should know this translation by now).

Put a Little Aside

Put a little aside, it doesn’t matter how small; it adds up. To be honest, no matter how tight it is, you cannot afford not to put something aside. Listen, if you don’t know what to do and you need help to make the change, call or go see a financial advisor.

True story …

Back in the day I won an award which included a cheque. I took this cheque and marched myself to the bank and opened a special account that I dubbed “my emergency fund”. Over the years money has been tight BUT, when I started the account I also set up an auto-transfer to it for the smallest amount (bear minimum). My dears, I can’t tell you how many times this “bear minimum” has bailed me out!

When I started looking into my finances (becoming a #MoneyManager) I came across Dave Ramsey, some of you may be familiar with him.  In his “Baby Step” plan there are two (2) go rounds for emergency funds:

1. An initial $1000 Emergency Fund (Baby Step #1)
2. 3-6 Months of expense (Baby Step #3)

While I am not recommending or endorsing, he is definitely on to something. We must make the step to put provisions in place for those possible emergencies. I look at Baby Step #1 as the quick sprint and then Baby Step #3 as the long distance trek.

Maintaining Your Emergency Fund

40-Forwarders, this race will be almost impossible if you are not tracking (monitoring and measuring) your expenses and paying off your debt.

Our emergency fund puts us in a better position and better frame of mind should “life happen”.  It helps us to continue living in the face of sudden and unexpected loss. Because we have put something aside, we don’t have to take out emergency loans, or borrow from our savings account or worse yet, draw down on our retirement savings and investments.

40-Forwarders, bear these things in mind about your emergency fund:

• Keep your emergency fund separate. Don’t mix it with other savings accounts. You may end up spending it “accidentally”.
• Your emergency fund is not for gallivanting and having a good time. It is for what is says, for emergencies ONLY.
• Use the fund when you have an emergency that is what it is there for.
• Replenish the fund. Once you use it, be sure to put it back (rebuild).

We can weather the storms of life if we are better prepared. It is not a matter of IF there will be a storm, it is WHEN. If you have not already started, it is not too late. Start small. Start an emergency sinking fund today.

My dears, 2021 is our Year of Consistency. Let us put some discipline behind building our emergency funds.

If you are already down the “saving for a rainy day” road, share some tips. What are some of those things you have had to use your emergency funds for? Share them in the Comments. Do you know someone who could really benefit from this post? SHARE, SHARE, SHARE. 😉