As if the 2020 year was not enough, 2021 is not looking much better.
My house is located in the city of Arlington, Texas between Dallas and Fort Worth. During the massive winter storm my house and the others around me lost power for about 4 days. After I ran out of firewood for my fireplace, I was forced to leave and go to another house that did have power. And then finally the power to my house came back on.
This whole episode made me think about what an emergency really is and how anyone can be prepared for the unexpected. There were a lot of things that helped me during this period.
- I had lots of blankets so that I could bundle up next to my fireplace.
- I had 2 cases of bottled water already stored at my house.
- Since I shop at Costco I had enough food to last a few days.
I have lived my entire life in Texas and have not experience a period like that week. But I have experienced several episodes of emergency in my life and most of them had to do with money.
Every person should have an emergency fund.
The best time to prepare for an emergency is well before it ever happens.
Experts recommend that you have 3-6 months worth of expenses saved in your emergency fund at a minimum. I like to keep more than that, because we are living through strange times, you never know what can happen.
It took me several years to fully fund my first emergency fund. Sometimes I would just add $10 a month. Go at your own pace and put in what you fell comfortable.
How much do you need in your emergency fund?
This is where budgeting comes in. If you track how much you spend each month then you can figure out exactly how much you need for: rent, food, transportation, bills
Just multiply that number by the number of months you need to save up.
There are so many things that can go wrong in life. I like to have multiple emergency funds to address different areas of my life.
I try to build up savings for each area of my life that I find important.
The more money you can build up, the farther ahead of your money you will be. This provides more and more security. And if you have children you definitely to have more savings built up. Families are expensive.
The process of creating emergency funds will help you determine which elements of your life are a true priority.
Your goals determine your priorities.
What are your long term goals?
Clearly define where you want to go.
And then make tiny goals that move you toward your big goals.
None of this happens overnight. It took me going broke twice before I realized I needed an emergency fund and then it took years to fund it. And I am still funding other goals.
Like buying a new car or taking a nice vacation.
And still emergencies are going to happen.
There are things that you just cannot plan for. But having different buckets of money will give at least some more options that you may not have had before.
Money does not buy happiness, but it can solve some problems.
So start planning for tomorrow and get your financial house in order.
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