Ever walk to the refrigerator, maybe to get you a cold pop, and when you opened the door the light did not come on and there was no cold air? Or maybe you’ve been BBQ-ing, the fire got too hot and you burnt the chicken. Guess we are going out for dinner.
Maybe you’ve had an unexpected bout with bronchitis that required expensive medicine. Or you suddenly remembered it’s back to school time and the kids had no shoes to wear for PE class. Perhaps something bigger has happened like a house fire where you were displaced from your home and possessions for a time.
Our reaction when crazy life events happen is basically to say, “O Lord Jesus, it’s a fire!” and then we do our best to put the fire out. Usually that requires the spending of money to make the situation right or normal again. The question for us then is “How can we be prepared when the fire comes?”
We can always expect life to deal us real emergencies. Emergencies can be small (as in burning the chicken) or big (like losing your home). We don’t know, however, when they are going to come. They always seem to catch us unprepared at the worst possible moment.
But what if you could be prepared? What if there was a way to lessen the stress that is created when we are forced to put out these fires? Fortunately there is and it’s called saving – the process whereby you set aside X amount of dollars from your monthly income and store that up for future use.
It’s not a new concept. In fact, the Bible describes an event in the book of Genesis where Joseph saved up the grain from seven years of bumper crops in Egypt because God told him those good years would be followed by seven years of severe famine. When the famine finally arrived, Joseph was able to open the storehouses of Egypt to feed the people for seven years. Quite an emergency. Quite a savings plan.
So how should we save for emergencies? Here are some things to consider:
1. The money you want to save for emergencies should be placed in a basic savings or money market account at a bank or mutual fund company. This will allow you to have quick, easy access to it. You don’t want emergency fund money tied up in something illiquid like a CD.
2. Use the emergency fund for true emergencies only. This is not a go-hang-out-with-the-guys-and-eat-pizza fund. You want the money to be there when you need it.
3. Begin with a small amount of between $500 to $1,000. This should cover most basic emergencies.
4. Over time, increase your emergency fund holdings so they cover 3-6 months of expenses. This could be anywhere from $10,000 – $30,000 depending on your expenditures and the size of your family. This amount will prepare you for a big life event like the loss of a job or a long-term illness.
5. If/when you have to use some of the money, replenish the emergency fund to the appropriate levels depending on which stage of the savings process you are in.
Saving helps reduce most emergencies to minor inconveniences. It forces us to develop discipline. It changes our emotions, allowing us to feel secure and at peace. Perhaps most importantly, It allows us to move on to the next stages of wealth building that include debt reduction and investing.
Saving money is the foundation to financial health. Without it, we can’t win. And we will find ourselves continually saying, “O Lord Jesus, it’s another fire! Now what do I do?”
Have you had a recent emergency that was covered by the savings you had accumulated?
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