From hurricanes to fires, people all over the nation have been finding themselves in emergency situations this year. What if next year is your turn? Are you financially prepared for an emergency? What steps can you take to become prepared?
I don’t know about you, but I’ve been following the news of the Southern California fires closely. That’s where I grew up, so it’s more personal to me than other natural disasters in other parts of the country. In fact, the home my mother lives in was built in 2009 because the original home on that lot burned down in 2007. So, I was watching carefully to make sure we would still have somewhere to go for Christmas this year.
My mom’s house is fine, but there are many others who aren’t so lucky. So many people lost everything in those fires and the timing, right before the holidays, seems to make it even sadder.
What Could You Do In An Emergency?
It makes me wonder, do they have anywhere to go? I’m sure there are plenty of people who would take them in over the holidays, but what about after that? For the months and months it will take to rebuild their homes?
Can they afford to replace their clothing and household items, and rent a place while they work out all of the details with their insurance companies? I’ve filed homeowners insurance claims and it can take awhile. Probably even longer when all of your neighbors are filing major claims at the same time as well.
What about you? If your house burned down tomorrow would you be okay? How long could you live off of your current bank account? How many of your possessions could you afford to replace? You may be able to wait several months for insurance money to replace your couch, but what about your underwear? Your car?
What An Emergency Fund Is Really For
Financial professionals commonly recommend having three to six months’ of expenses or salary in a savings account for emergencies. That’s good advice, I recommend it as well. There is a problem, though, and I think it’s in the way we communicate it.
Most people see the emergency fund as a way to protect against the loss of a job. If you lose your job, you have three to six months to find one before you’re in trouble. So, if they have good job security or a spouse that works, they think they don’t really need much of an emergency fund. If you’re an anointed preacher, have a large church, don’t cheat on your wife and don’t embezzle money does that mean you don’t need an emergency fund?
No. Because no matter how secure your job is, your house could flood in a hurricane or burn down in a fire or your son could end up in the emergency room and spend a month in the hospital. Those are all things that can break you financially even while you’re pulling in a salary.
My son had severe abdominal pain this fall, so we took him to urgent care. They ended up sending him to the ER to make sure it wasn’t his appendix. In the end, we got a bill for urgent care, a bill for the tests done in urgent care, a bill for the 4-hour hospital stay, a bill for the doctor, a bill for the ultrasound, and a bill for the pain medication they gave him before the ultrasound (yep, $85 worth of morphine for a 6-year-old).
Believe me, those bills add up. One of them was over $2,000. God healed him, but how much more would it have been if he had needed surgery? I shudder just thinking about it.
If it weren’t for our health savings account, we would have been digging into our emergency fund big time. If we didn’t have either of those, we would have been in big trouble.
How To Build An Emergency Fund
So, no matter how secure your job is, how healthy your family is, or how safe you are from natural disasters, you still need an emergency fund. I’m sure you agree with me by now. But getting you to agree is the easy part. The hard part is actually doing it.
The #1 reason people say they don’t have money set aside for emergencies is that they don’t have any money to save. That’s not a good enough excuse. Emergencies don’t care if you think you have enough money or not, they’re going to happen anyway.
How do you build an emergency fund when money is tight and you have no margin? One dollar at a time. Cutting out one $5 coffee a month will net you $60 in a year. Not much, huh? But that’s still $60 less that you would be going into debt if you think your credit card is a good enough emergency fund.
Are you an awesome steward of a small paycheck and have no room to cut? Work from the other end. Earn some extra money on the side. Babysitting for 5 hours could earn you that same $60 mentioned above. Do that every month and you’ve got $720 to put into your emergency fund. That’s enough for the new set of tires you didn’t realize you’d need this year.
For more ideas on how to earn extra money, you can read my post from last year about earning extra money for Christmas or my post on how your teen can pay their way to summer camp. The suggestions don’t only apply to teens, you can do them no matter your age. And remember, keep your emergency fund in a savings account or money market account where you can access it easily. Don’t invest it.
So, what are you waiting for? If you don’t already have one, get started building your emergency fund NOW!!! Be like the wise woman of Proverbs 31 and “laugh at the days to come” because you know your family has the financial cushion to handle whatever comes your way.