Financial Emergencies, Be Prepared

I apologize for taking such a long break from posting, but after all the stories about the number of people living paycheck to paycheck during the government shutdown, I decided to start posting again. If you are a regular reader and have followed my advice you may not need this one, but please pass it to anyone you know that might; because; clearly, there are a lot of people that have not gotten the message. The first post I made on my bog was titled Pay Yourself First. Not doing so is a disaster waiting to happen.

It is important you practice this philosophy all the time, not only to save for retirement but also to make sure you have something in case of an unexpected interruption in your income stream or other financial emergency. The economy is rolling along quite nicely at the moment, yet a lot of people still are not putting anything away for a rainy day. I feel empathy for all the government workers that went without paychecks but hope this is a wakeup call for them and for everyone else. It does not matter who you work for, including if you are work for yourself, the unexpected can happen and you could be without a paycheck due to no fault of your own. If you have faced this in your life time you know what it is like. Even if you are entitled to unemployment compensation the most you will get in Michigan is $332 a week and a whopping extra $6.00 a week for each dependent up to a max of five. I don’t know many people that can live on that alone. Even if you can, that only last for 20 weeks.

So if you are one of the 58% of Americans that do not have $1,000.00 in your savings account I suggest, for your own good, and to show solidarity to all the workers that did not get paychecks for a month, that you act as if you have no paycheck until you have at least three months of savings set aside. You would be amazed about what you can do without, and it is better to learn that before you are forced to learn it the hard way.

We are several years removed from the great recession that started in 2007. For my readers that aren’t old enough to have worked through that period those were scary times. While I have never lived pay check to pay check and have always paid myself first, I was a very aggressive investor and rarely had much cash lying around. Even though I was fairly confident I would keep my job at the time, there were no guarantees. As a single parent and sole bread winner I did not want to be forced to sell stocks while the market was down, (indeed I wanted to buy as many as I could while they were on “sale”) so I put myself on an austerity program to conserve as much cash as possible. I was amazed at how much I could save and how much more I could make on my side gigs (more about this latter) that It gave me much comfort during those difficult times.  When the difficult times passed I went back to many of my old habits because I was paying myself first and could afford them. But what surprised me is that some of the austerity measures I put in place are still with me today.  I actually found I liked some of the cheaper things better or really did not miss some of the things I used to think I needed to make me happy. So just doing a trial run gave me a life time of savings on many items.

The point is that there will be another recession, and there will likely be a point in your life where you face a financial emergency, so it is better to prepare for it now than to wait until it is staring you in the face in the middle of a cold winter. I know it is not easy but it is necessary and most people know it, they just choose not to make the tough choices. It starts with realizing the need and then finding ways to meet the need. You can find any number of articles on the subject, I have included several I have written for easy reference. Just click on the hyperlinks to go any article that interest you.

 Knowing the difference between needs and wants

 Setting priorities for your savings and financial plan

Are you saving enough?

How much cash do I need and where should I keep it.

So now you are convinced of the need to save but don’t feel you make enough money to save, or at least are not willing to give up any of your wants at this point. The alternative to doing without in order to save, is to make more money. We live in a GIG economy. If you absolutely cannot give up some of your wants than find ways to increase your income. In my adult life I have always had a side job or gigs to provide a second source of income. While on active Duty with the Navy in Japan I taught English on the side. When I left active duty and went to a full time civilian job I stayed in the reserves. After I finished my time in the reserves I looked for side gigs.

Fortunately for me I have a law degree and I am pretty good at financial planning so I have always been able to find lucrative side gigs that I actually enjoy doing and get enough offers that I can pick and choose what I want to do. But even if you can’t come up with a side gig you love, with this booming economy, there has to be a part time job you can do for 10 hours week until you build up your savings. If you value your time too much to do that, then give something up. One way or another you need to find a way to save some money so you don’t have to resort to begging when that financial emergency lands on your door step.

If you find the information useful please feel free to share it or forward the email to anyone you like. You can also follow me on Facebook or Twitter.