Pichi Bellingrath McClure* says everyone should have an emergency fund and outlines how to build one quickly.
“Money looks better in the bank than on your feet.” —Sophia Amoruso
With regards to an emergency fund, don’t live life without it. What exactly is an emergency fund? It is a stash of money put aside to cover financial setbacks.
The goal of an emergency fund is to empower you and help you make it through any emergencies that come your way.
Even though you cannot control the actual emergency, you will be able to call the shots on how you want to live with regard to the unplanned negative event.
There are two types of emergency funds that put you in the driver’s seat: short-term and long-term.
For the short-term emergency fund, you’ll possess cash on-hand to replace a flat tire or pay your expenses if you get laid off a short period of time.
Squirrel away cash to cover about three to six months of your living expenses.
For your long-term emergency fund, this is where you save for decades.
Saving for decades, which seems almost impossible, can be done. As Amelia Earhart espouses: “The most difficult thing is the decision to act, the rest is merely tenacity.”
You can save for decades for a lifetime of security.
Once you attain a short-term emergency fund — as daunting as it may seem — promptly start investing in your long-term emergency fund, because when you accumulate enough funds, you are protected from any catastrophic emergency.
Not only will you be able to pay for the tire and protect yourself from a short-term layoff, you’ll be able to weather long-term scenarios.
You can’t control the adversity, but you can mitigate the adversity through preparation.
Having a long-term emergency fund gives you the financial freedom to handle any type of sudden emergency and its consequences.
Possess the discipline and the tenacity to put away money for a rainy day, and when that rainy day comes, you’ll be grateful.
When adversity strikes, nobody ever complains that they saved too much money.
The COVID-19 pandemic is a perfect example of the importance of having short-term and long-term emergency funds.
Women around the world have been furloughed and terminated from their jobs. Businesses have closed. People have fallen critically ill.
On New Year’s 2020, the shiny crystal ball fell in celebration and hope for a bright future.
No woman could imagine that a state of national emergency would be declared on March 13, 2020, searing into our national consciousness images that changed America.
Were Americans prepared for this emergency? The Federal Reserve states that fewer than half of Americans have funds sufficient to cover a $400 unexpected expense.
COVID-19 has strained the finances of Americans, but this doesn’t have to be the case.
You can utilise planning, strategy, and tactics to take control of your finances.
Discipline
You need to sock away your money on a regular schedule.
Perseverance
Stick with your plan to reach your goal, even during tight financial times.
Prioritise
If you don’t stick to a regimented savings schedule, you’ll find excuses not to save money and spend it instead, creating financial disaster.
A good motto: Pay yourself first.
Impulse control
Instead of spending money without thought, set a preset amount like $25 and for everything over that amount, wait a self-imposed 24 hours.
If you don’t buy the item, put that money in the bank. Remember — your money looks better in the bank than on your feet!
Be mindful
A seemingly small expenditure today means you will have much less money in the future.
Each $1 saved that is invested at a seven per cent return will double in value every ten years.
If you save $1000 rather than spend it, that money will grow to $2000 in 10 years, $4000 in 20 years, and $8000 in 30 years.
Consider every angle
We women not only have to protect ourselves and our families, but our pets, as well.
We need to squirrel away money and ensure the well-being of our furry loved ones.
You can incorporate your pet within your own emergency plan, or you can create a separate emergency fund for your pet.
We have talked about unforeseen emergencies.
What about emergencies in the more distant future such as forced, earlier-than-planned retirement?
Women have made great strides since the 19th Amendment, and we should be proud of ourselves.
However, we should not stop here, as our retirement security is glaringly disproportionate to that of men.
Brookings Institute, a prominent Washington, DC think tank, espouses: “Women receive social security benefits that are, on average, 80 per cent of those men receive.”
This is due in part to women providing most of the caregiving.
Many stop their careers to care for children and the elderly without monetary compensation.
We need to master financial literacy and set aside a short-term emergency fund of cash.
Then, women need to save regularly and put the power of compounding interest to work for them to create a long-term investment emergency fund capable of handling future unexpected events farther down the road.
Here are financial literacy podcasts by women to look into:
- So Money.
- Clever Girls.
- Brown Ambition.
- The Financial Grownup.
Start somewhere. Start now. Seize the opportunity. Empower yourself with knowledge.
*Pichi Bellingrath McClure is a resilience expert and contributor at Ellevate.
This article first appeared at ellevatenetwork.com
