We All Need Emergency Savings
Virtually half, or 49 percent, of all Americans, are still living paycheck-to-paycheck. But it's worse for us! – 69% of women — report that they don't have enough money in an emergency fund to cover six months of expenses. The first thing we need to do is get that emergency account funded. We must protect our families in case all hell breaks loose.
Beware of Murphy’s Law, which states “if all hell can break loose then all hell will break loose”. Let’s keep “Murphy” out of the family. (No offense to anybody named Murphy)
We now have a calendar…right/ (remember last week’s post about vagueness?) we’re tracking our money and we know when each bill gets paid every month. Now we set our priorities… is it “that” purse or saving money in the emergency account. Kind of like having a little devil and a little angel on each shoulder. There isn’t room for a debate- it’s about your kid’s financial safety.
The first check I write each month is to me. I move 10% of my net income into my savings account. Before I buy or spend it on anything else. My Granny taught me this practice when I was a kid. That 10% month over month is set aside in a regular savings or money market account at your bank. It can’t be touched unless all hell breaks loose. Keep growing it until you reach the 1st milestone –Enough to cover 6 months of household expenses in an emergency.
What’s an emergency? If you need to ask if something’s an emergency it probably isn’t an emergency. But since we aren’t vague anymore (see last week) here are examples.
- You become disabled. Even if you’re lucky and have Long Term Disability Insurance through your job, the disability payment alone won’t pay your bills. Group Disability policies pay only 60% of your Pre-Tax (Gross) Income. Most premiums are paid automatically via paycheck deduction before taxes- which means get this…the disability benefit check is subject to Income Tax. You’re now living on half your paycheck. Half a paycheck is better than zero paycheck -we all need this type of coverage, find a way to buy it, it’s an affordable way to protect yourself. Also, research individual supplemental policies (more on that in the future). Disability is an emergency.
- Loss of Income. If you’re laid off or lose your job, you’ll need breathing room. Having the emergency reserve provides you time to conduct a proper search so you aren’t stuck in the 1st job you can find just so you can pay rent. If you take a job beneath your experience and training just because you need the income you won’t have the time to interview for the better higher paying job. If you go on Unemployment, that won’t pay you enough either. Loss of Income is an emergency
- Spousal support/ Child support is withheld. I don’t need to go any further here.
I hope you see my point here and begin funding your emergency account.