Hey guys, It’s Chelsae from the Financial Diet.
And this week’s video is brought to you by Squarespace.
And today we’re going to be talking about something very very,
very fundamental to personal finance which is an emergency fund.
Now chances are if you’re a fan of this channel,
you’ve probably heard us mention the words EMERGENCY FUND approximately 7,000 times.
And there’s a reason for that.
Because you should think of the concept of an emergency fund as emergency for two reasons.
No.1 it exists to cover you in a case of
unexpected expenses AKA an emergency.
And No.2 if you do not have one,
it is an emergency that you make one.
你的目标 你的收入多少 你的现状都不要紧
No matter what your goals, your income, or your current situation.
If you do not have an emergency fund,
you’re not allowed to do anything else with your money,
including paying back loans until you have one.
Long story short, an emergency fund needs to be there in case of anything.
An easy example is
if you lose job or have to make car repairs or get sick.
But it doesn’t matter what that thing is.
The point is you have to have enough of a buffer in your financial life
that every single unexpected event is not financial ruin.
And if that sounds ridiculous to you
about 40% of Americans are one 500 dollar emergency
away from financial ruin.
And now how much should your emergency fund be?
Now there are a lot of varying opinions on this.
But generally speaking,
it should be between 1 and 6 months of total living expenses put away.
We tend to say 3 months is a good goal.
Now generally speaking, it takes a person around 6 months
of concerted effort to save up an emergency fund.
But that is assuming that A: they’re making every possible reduction in their budget,
and B: they’re adding sources of revenue wherever they can.
But if given your numbers it looks like
it will take you close to a year to save that,
do not get discouraged.
The point is you must have it, because you’ll never know when you need it.
Without an emergency fund you really can not have financial stability.
And let’s be honest,
having that money socked away gives you way more freedom in your day-to-day life
to make the choices that are right for you
instead of the choices you’re forced to make.
So how do you save an emergency fund?
You know you have to do it, you know it’s the first priority.
But what are the real strategies to make it happen?
Now first and foremost, saving specifically for an emergency fund
requires a lot of more strict and aggressive budgeting rules,
because it is such a do-or-die thing.
For less immediately essential savings goals,
you can definitely have a more malleable approach.
So first and foremost, when you’re specifically saving for an emergency fund,
you need to set goals for yourself that are realistically achievable.
Now depending on your personality type, you can make this
你可以设立每日 每周 或每月的目标
this daily-, weekly- or monthly-based goals.
But the point is they’re tailored to how much money you’re bringing in,
and how much your daily costs are.
And it’s better to start with smaller, more manageable goals
that you can meet and then raise,
rather than setting them too high and getting discouraged.
Now maybe this sounds like it should go without saving,
but I’m gonna say it anyway.
No matter how much you’re saving every week,
it can not be in a place that is tied to your debit card.
Basically when you’re trying to hit the ATM,
or spend on something online or whatever it is,
this money can not be available to you.
It can’t be like one of those things
where it’s like “hey, do you wanna move some money over?”
Worst of all, it can not be in your checking account.
Money that is easily accessible to you at any moment’s notice
is money that you’re going to have incrediblely hard time saving.
My personal recommendation is to have this money
in a savings account at a different bank from where you have your checking account.
So you can’t even be tempted to cross transfer them.
But if you are too lazy or annoyed by that,
at the very least have it in a separate savings account.
And one important note here is that unlike a lot of other savings,
this money has to be in a regular savings account,
and not in like a time deposit or a CD or an investment account.
Because it needs to be liquid.
The whole point of this money is it’s like in case of emergency
break glass and take the money out of this savings account so you can use it.
But there’s a big difference between the money being liquid on a day’s notice
and on a second’s notice.
And the difference is keeping it the hell away from your checking account.
Now another thing you have to keep in mind when you’re saving your emergency fund
is you must treat it like a line in your budget
that is mandatory just like any other bill.
Actually putting that savings amount as a line in your budget will help you do it.
Because A: it will be top of mind,
and B: it will feel like an obligation.
Another thing to remember is to take the advantage of
any and all influxes of cash as a time to bulk up your emergency fund.
Now whether that’s a tax return, a check from your grandmother on your birthday,
or some unexpected refund at a store.
Any money that you were not expecting to have
needs to go directly in your emergency fund.
Because it is the money that you’re the least likely to miss.
Now as I’ve mentioned before,
it is almost inevitable for most of us that
we’ll have to find some extra sources of revenue to help bulk up our savings.
Now I’m not saying you’ll need the side jobs forever,
but particularly when saving up your emergency fund,
consider yourself in a state of emergency.
Now a good place to start looking, if you want painless extra sources of income
is our video on 12 Side Hustles you can do from bed,
which you’ll find in the description.
But beyond that look not just around your home at ways
you could be making extra money,
But look at the skills you happen to have,
even something as simple as “Hey, I tend to be good with kids.”
means “Hey, maybe you should take on some babysittingn.”
Babysitting four or five nights a month can easily mean an extra 600 dollars,
especially when you get multiple parents involved
where they conbine their kids together with you
and you get pay from everyone.
And between the savings part of the goals
and the earning extra money part of the goals,
turn it into a competition either just with yourself or
with someone else who is trying to make savings goals as well.
A simple fun thing to do is to pick a low-cost treat
that you would really look forward to and say OK
when I’ve saved my first thousand dollars, I’ll do X.
For me a small personal celebration is getting one of those mini bottles of wine
and taking it to like a little Indie theater and watching a weepy foreign movie
with my big salty popcorns, so I can just sort of sit there alone
and cry in the dark. It’s wonderful.
But whatever your little-me moment is,
make it a built-in goal to your savings.
Now lastly I’m not gonna lie.
When you’re in an emergency fund savings mode,
you’re going to have to cut a hell of a lot from your budget.
It’s gonna hurt a little bit,
But we find the best way to offset that is to
rotate the parts of your budget that you’re cutting heavily from every month.
So let’s say one month you’re doing
no going out to restaurants or bars.
Well, then maybe the next month you’re saying no shopping.
Maybe one month you’re switching to all generic brands for everything you buy,
the next month you’re committing yourself to using only public transportation
and your own two feet.
The more you can make every month feel like a distinct and different challenge,
the less you’ll feel like you are just being punished all the time.
每个月花招百出 你的大脑仍然不会遗漏东西 这太神奇了
It’s crazy how much your brain doesn’t miss something as much when it’s changing every month.
Long story short, there’s no shortcut to saving an emergency fund
and you have to do it.
But if you start looking at these foundations of your financial help
not as a punishment but as a gift you’re giving to yourself.
It’s much easier to stay motivated,
and there’s truly no feeling better than knowing that if the unexpected happens,
you have it covered.
Having that emergency fund can literally be the difference
between staying for decades in a job you hate
and having the courage to change your career path early on.
Because at the end of the day, so many of our choices are just based on
whether or not we have freedom and flexibility to make them.
You shouldn’t be good with money because you want to be rich.
You should be good with money because you want the freedom
to live the life that makes you happy.
And an emergency fund is the first step to making that happen.
So as always guys, thank you for watching,
and don’t forget to hit the subscribe button and come back every Tuesday
for new and awesome vedios. Bye!
This episode is brought to you by Squarespace,
which lets users create custom websites or online stories with it’s all in one platform.
If you’re looking to make your next move on a business idea
or want to launch your creative project,
check out Squarespace with award-winning templates
and 24/7 customer’s support.
You’ll have everything you need to create a website,
build portfolio, design an online store and more.
无论你是一个令人鼓舞的企业家 音乐家 艺术家或设计师
Whether you’re an inspiring enterpreneur, musician, artist or designer,
make your next move by visiting squarespace.com,
and use the code “FINANCIAL DIET” for 10% off your first order.