Do you have an emergency fund? Why or why not? And, can emergency funds actually be sexy? In this episode, I discuss why everyone should have one and how the definition of what it actually is can vary widely.
Follow along with my FREE worksheet on creating your emergency fund plan!
As a listener, I hope your goal is to uplevel your money and your life. How do we start to do that? One of the best ways to become more empowered financially is to have an emergency fund.
While an emergency fund might not be the flashiest part of your finances, when you need one, it is everything. In fact, when a financial crisis, like the COVID-19 pandemic, strikes unexpectedly, it is painfully clear how important that safety net is. So let’s take some time to explore what an emergency fund is and how you might fund yours.
The biggest consideration when it comes to emergency funds is that the money is designated for something that is truly an unexpected emergency. When it comes to finances, a loss of income or reduction of income is probably the thing that is most likely to catch people off guard.
Some people also include home and car repairs and medical emergencies in their emergency fund planning. However, it is important to ask yourself if there are certain things that you can anticipate and plan for. For instance, as a car owner, you know that you are responsible for oil changes, tire rotations, and other maintenance. The same is true for homeownership. That is why it is important to turn a critical eye to your finances to see how you can prepare for some of these costs separate from your emergency fund. It is also why making sure that you have the right health and life insurance is invaluable.
When it comes to creating an emergency fund, I teach a four-step approach.
- Define it
- Calculate your needs
- Determine where it will be
- Create your plan
Explore this approach more by downloading my free worksheet and tuning into this episode.
Depending on where you are in your financial journey, you may already have an emergency fund, you may need to refill it, or you may be in the process of creating it. One of the most important things to remember about personal finance is that it is personal. That means that you want to create an emergency fund that empowers you based on your situation. You won’t regret building this safety net into your financial plans.
In this episode, we explore:
- Why you need an emergency fund and what you should actually use it for
- The difference between lean and fat emergency fund numbers
- Common and alternative ways to store your emergency fund, so that it is there when you need it
- A deeper dive into the four-step process you should use to start your emergency fund
- How I created my emergency fund and how it has evolved over time
- Other sources of cash that you can draw from in emergencies
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Featured on the episode:
- Worksheet: Emergency Fund Worksheet
- Blog: Rethinking Emergency Funds
- Learn more about how to manage your mindset with Wealthy Mom MD