At the end of last last year, we talked a lot about saving, starting with an emergency fund and then moving forward into thinking long term. But I have an interesting question to ask…have you ever thought of insurance as a part of your emergency fund or saving strategy?
First let me give the high-level, overall saving strategy we advise people to follow… You must have some cash available at home – what if a natural disaster knocked out all of the electricity so you couldn’t use a credit card or withdraw anything from the bank? It’s a good idea to have at least a few hundred dollars that you have access to at all times. After that, you need at least a few thousand dollars, ideally 3-6 months of your expenses (in an account that can grow to keep up with inflation), that’s designated for your emergency fund – if you lost your job, this is what you might start tapping into so you don’t run up your credit card balance. This needs to be liquid funds that you can access within a day or two. And finally, you want to build long-term savings that’s growing for your retirement, and don’t touch it until then.
Now, let’s consider what insurance is in general… Insurance transfers some risk from you to an insurance company. You pay them a small amount ongoing, and they agree to pay a large amount IF certain circumstances arise. The idea is that if something happens that is covered by insurance, it doesn’t ruin you financially – in that moment they pick up the bulk of the responsibility. There are many kinds of insurance that cover all kinds of areas of life. Some insurance coverage is required by law, some kinds are very important to have, others are a good idea, and others are basically a total waste of money.
So back to my question, could insurance be part of your overall emergency strategy? You don’t want to sacrifice building your savings in order to pay for an insurance that is unlikely to ever give you a benefit. But some insurance coverages could be a very smart move, especially if there’s an indication that you will likely face the circumstance that it covers. It’s also important to point out that it’s very important for you to understand what an insurance policy does do and what it doesn’t do. Some people get burned because they think they’re covered for something, but they misunderstood what the policy actually does or that thing isn’t actually part of the contract. Be informed and don’t make assumptions.
Insurance isn’t saving, but they go hand-in-hand. If you have the right coverage when a situation happens, it could save you a huge amount of money at that point. You’ll have to balance your actual saving strategy with what protection you want to put in place, but make sure you protect the things you should. You also should review your insurance coverage periodically to see if what you have is still a good fit and if there might even be a better product or better rate available to you now.
Have questions? Comment below or message us and we’ll do our best to help.
How is your progress on saving an emergency fund? Your assignment is to have $1000 saved at the end of the year, and let me make this clear… Black Friday is not an emergency!
As the holidays approach, retailers are doing their best to whip us all into a shopping frenzy. Never-before-seen savings on certain items make us feel like we HAVE TO buy them right now. We head into a store with one or two specific targets in mind, but then walk out with 7 or 8 items because, “hey, I’m already here and it’s on sale…” But keep in mind that some things really are on sale, while others only look like they’re on sale. Don’t get caught up in the hype!
What if you can take a step back and evaluate what you REALLY DO NEED? If you can’t resist diving into the fray of Black Friday, Cyber Monday, and all of the other deal-o-ramas, you should first make lists, set a budget and then find a way to keep yourself disciplined. Who are the specific people you’re shopping for? Are there meaningful gift options that don’t cost much? Are there items where you can find off-brand versions or last-year’s model that are still good, but less expensive? How much can you actually afford to spend (not charging everything on a credit card and paying it off for a year)? What if you left your cards at home and only brought the amount of cash you budgeted? Or maybe use a debit card, but first make sure there’s only the amount you want to spend in the account at the time of the shopping trip (by transferring the rest to savings before and then back after)?
And for children… kids don’t need much to play – they’ll invent fun out of whatever is laying around, so expensive gifts probably aren’t necessary. Kids spend too much time stationary and experiences can create memories that last a lifetime, so instead of game systems and other electronics maybe consider a camp, trip, art activity classes, membership to an activity group or sports team, etc. If it’s a significant cost, pool a group of family or friends together to make it happen.
We’re heading into a wonderful time of the year and it’s good to be generous. But please keep the bigger picture in mind. Make sure that along the way you’re still building your future, and the start is your $1000 emergency fund.
Did you start to implement the last saving idea we shared? Please share your progress… If not, please decide to take action. Your future self will thank you
Here’s another saving idea you can implement starting today. The more of these ideas you implement, the more momentum you’ll gain!
Think about all the subscriptions you have… TV, music, store clubs, gym, monthly clothing or makeup boxes, magazines, professional services, etc. Are any of those monthly payments going to waste? You have them just in case, but in reality you never use them? Are you overpaying for something where, with a little research, you could reduce your cost? Do you maybe have multiple subscriptions that overlap in purpose and one could be cancelled?
Many people start a subscription and then over time don’t really think about it any more. At first, it may have been exciting, maybe indispensable, but things change. Maybe you don’t have the same need or desire any more. Take a look at your subscriptions and see what you can cancel or cut back on. Since you were used to those payments already, take the difference and channel it into savings for yourself.
Again, the first goal is to build a $1000 emergency fund. Can you accomplish that by the end of December? Take steps now to make November and December the time when you truly develop a healthy saving habit!
In our last post, we shared that you need to save. An emergency fund is a crucial step toward financial freedom. So, how do you save? If you’re like most people, there’s never any money left over at the end of the month. We thought we could share some practical ideas that you can implement starting today. Here’s idea #1…
Do you realize how much you spend on food, coffee, sodas, sweets, boba, and other miscellaneous items every month? Let’s take a quick look at just going out for lunch every day at work. If you work 5 days a week for four weeks per month, that’s 20 days. If your daily lunch run is $15, that’s $300 per month going toward just one meal each day! Did you realize it was that much? What if you consider all of the other daily expenses that seem like necessities?
Now, we aren’t saying you should completely cut out all of these items, but strategize a reduction so you can redirect some of your spending to saving. Plan ahead to bring a lunch a few days a week. Or maybe always bring a piece fruit with you so you buy less each time. If you have a sweet tooth, maybe have something available at the office so you don’t add the treat, boba or whatever to your meal purchase each day.
Again, we’re not necessarily saying to eliminate, but have a strategy. A sudden extreme change often isn’t sustainable, but incremental changes are more likely to last. Between just those few categories we listed above, most people can save $300 or more per month that can be used toward a solid saving strategy.
Our challenge to you is to, if you don’t already have it, build a $1000 emergency saving fund by the end of the year. Decide that you won’t put it off any more. You can do this!
Comment below on a change you will make starting today. And please share your saving success stories as they unfold!
More ideas coming soon…!
According to recent surveys, nearly one quarter of Americans have no emergency savings, 40% don’t have $400 and 65% save little or nothing. Why do these numbers matter?
Life happens…some kind of emergency is coming. What will you do when you suddenly face a $500 or $1000 unexpected and unbudgeted expense? People with savings have the option of paying cash from their reserve. People without savings often have to take on debt – whether a credit card or a loan of some sort.
How much have you saved already? What are you on track to save? What’s the magic number that you need to reach? If you don’t have a good savings habit, start now…RIGHT NOW! Start somewhere. Your first goal should be to build a $1000 emergency fund. After you have some momentum, increase what you’re saving.
Our savings habits over time can have a profound impact on our retirement. Build good habits that build the future you want to live.