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Friday, April 18, 2014

Goal #1: Building a Starter Emergency Fund

Have you ever setup an “emergency fund” before?
I must say I probably read or even heard about it years ago but just didn’t show the slightest bit of interest then. Knowing what I know now, I feel a deep pang of regret. Of course there’s never any use lamenting the past. Also, the people around you matter too. It definitely makes a big difference having someone you know, regularly ask “How are you doing with your emergency fund?” than none at all. Since there’s really no use going back let’s move forward then shall we? Without the slightest hint of overbearance I aspire to be at least a good influence on the people around me especially the younger set. I’d rather be one of those people who’d ask you over and over, “How are you doing with your emergency fund?” than say nothing at all. I want to reach out to everyone in any small way I can and the sooner I can influence someone, the better and bigger his or her chances of enjoying financial freedom!

Contrary to what you probably think, an emergency fund is not your ordinary savings. Well, yes, you save it but you’re not supposed to touch it. No, you can’t use it to pay for that new phone neither can you use it to pay for that broken showerhead, and so on and so forth. You can only use it when it’s a matter of life and death. As for your funds/savings for the latest gadget or for fixes around the house and the like, there’s a solution to that. It calls for another kind of savings. You can probably call it (as Jordan calls it) “Family Savings”. However, before you can buy that new phone or “want”, you have to ensure you already have 3 months’ worth of income saved in it (and that’s separate from the “emergency fund”) and the money to pay for the new phone.  In short, you need to save for that phone or want. Challenging, right?

So going back to our 1st goal, it is to set up a $1000 emergency fund. Why just $1000? Well, you can read more about it here. J Then once done with this goal, we’ll continue to build the emergency fund up to 3 to 6 months’ worth of income simultaneously with the “Family Savings”. Yes, regardless of whether you earn hundreds and millions, it’s always going to take some time and you just have to give it time. You see, if it’s not obvious, time is a very important factor in succeeding with financial freedom. Why do you think interests only come after some time and not instantly? Why do you think investments such as mutual funds and some such require a period of time before you get to touch your money again? Time indeed (aside from discipline and everything in between) is important. So how do you do it so that the emergency fund is there but not easily accessible? You can probably put it in a passbook. Or you can get a little creative about emergency funds. We’ll talk about these and more on the next entry with my 2nd goal. LOL!

So, how about it? How soon are you going to start building up your emergency fund? :)


Jackie Fat-Yara said...

Great jin :-) looking forward to your next entry :-)

inJiNuous said...

thanks, Jack! wish you all the best in this journey. go lang nang go! hihi

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