The holiday season brings at least two conflicting emotions: hope and stress. We feel hope and excitement for the coming new year but also, the feeling that we need to tighten our belts after we take inventory of the damage that was done to our budgets in such a short time span. January is a great time to pay attention to and realign our financial well-being. January has officially been deemed “Financial Wellness” month for good reason. There are several tools available to establish good financial health, but one that is often overlooked is the importance of establishing an emergency fund.
Most people plan only for their day-to-day expenses and short-term events that they expect to occur. It’s hard to envision a time where the worst might happen. However, if you are striving for financial stability, establishing an emergency savings fund is the first thing you should do.
Losing your job or being unexpectedly hospitalized can cause significant financial stress. Without a savings plan in place, a life setback could have a lasting impact on your future goals and financial well-being. The Covid-19 pandemic showed us just how important it is to have savings in case of an unexpected life event. An emergency fund grants you peace of mind and helps you know that you will be okay.
How Do I Get Started?
The general rule is to have 6 months of living expenses saved which means you should calculate how much you are currently spending each month. An easy way to calculate this is by reviewing your bills for the last three months and average the costs. You’ll want to make sure you include monthly expenses like your mortgage or rent, utilities, insurance, transportation, groceries and discretionary spending.
Create a System for Yourself
If you struggle with saving and you need a solution to make money less tempting to spend so you can accomplish your savings goal, then have a portion of your paycheck automatically deposited into a separate savings account. There’s a reason the saying is “Out of sight, out of mind.”
Once you have gotten into a good routine of saving, increase your savings amount by a percentage or a dollar amount. Do this on a consistent basis until you have reached your savings goal.
Take Time to Celebrate Your Wins
Regularly monitor your progress and congratulate yourself as you meet different milestones. Celebrating your successes can provide encouragement to keep going.
Where should I Store My Money?
Each person’s situation is unique, but your holistic financial advisor can examine your entire financial picture, help you calculate how much you need in your savings fund, and where your money should be invested to help you meet your goals.
Unexpected events can be stressful and costly. Having an emergency fund provides you the confidence that you can tackle life’s challenges without adding money worries to your list. Emergencies will happen, but with extra preparation, you can be ready.