3: Emergency Fund

To see the examples in the episode checkout the free corresponding course https://moneyforaveragejoes.com/course/emergency-fund/

Only transcription below

Welcome to money for average Joe’s a 12 part series on personal finance. I’m your host, Jason Weaver, an average Joe. Episode Number three is all about building a one month emergency fund as fast as possible. Then once your consumer debt is gone, build up to three to six month fund. That way you can live better and have more money for when it matters most.

As a quick refresher, Episode Two was all about understanding where your money is going, and then start course corrections to where you want to spend your money. I cover tools and average spending by category.

0:45

I love this quote from the personal finance course The Church of Jesus Christ of Latter Day Saints puts on for free,

Build a one month emergency fund as fast as possible. Even if you have debt, make only the minimum required debt payment until you have built a one month emergency fund.

So the one month emergency fund is your short term emergency fund. An average american fund for one month will be between four and $6,000. You’ll place that into a bank account separate and distinct from everything else. That could be a high yield savings account. If you just Google that, you might find some really great options like I did, but you want to be able to get it out quickly in case of emergency but you don’t want it to be staring you right in the face. So that when somebody brings you pizza or whatever you’re doing, you know, reach into it, right. So remember to use that emergency fund. Okay, let’s let’s read this quote, remember to use it only for actual emergencies and a budget for everything else. So that’s also from the LDS personal finance course. If you have used the funds for an emergency, just go back to building it back up before paying off debt, or other savings goals. Many experts refer to this as paying yourself instead of a credit card, who will charge you interest in your time of need. Many studies have shown you have around 1000 and unused things in your home. And you could sell those to help build your fund really fast. Also love this quote, to help speed up the process, you may want to find extra or better work, sell something you can live with out, as I’m just mentioned, or eliminate some unnecessary expenses. That’s also from the free personal finance course put on by the church. So some people start their emergency fund by doing a combination of three things and we’ve already covered a bit of them. So household stuff, or more money or work, side hustle or reduce expenses, so you can pay yourself more and I do Several bonus episodes or will do several bonus episodes on, you know, paying yourself more by reducing your expenses and also earning more money. So stay tuned for that in the future.

Before I cover the emergencies that are most common to hit you in the United States, I want to mention to our new listeners, the essentially I created this course as a supplemental course that you can use while attending with your spouse, the Free Church of Jesus Christ of Latter Day Saints, LDS personal finance course. Or it can really be used for anything like Dave Ramsey’s, you know, Financial Peace university or any other personal finance course. But I also want to mention that I am not affiliated with them in any paid way or authorized by them. I’m just sharing my personal journey with you guys. And then I like to, you know, dive a little bit deeper than that. Lot of these courses are debt diving. So if they say, you know, go get the right kind of education Okay, well how do you know if there’s going to be a demand for your education or what’s been the return on your investment or you know, just dive a little deeper. So looking at this study by go banking rates the most common reason Americans use their emergency savings funds were 26% major household repairs, 26% car expenses, 24% medical emergencies 20% job loss 16% cost of living increases 11% sudden moves. And I also broke that down for you. You know, there’s small and larger expenses right? And that kind of graph doesn’t show you that so small expenses, you have to give a gift last minute or you forget about Christmas, what you shouldn’t be doing Homer appliance or Obviously, you know, if your dishwasher goes out that’s, you know, could be, you know, cheap and $500 cell phone replacement. You know, while I was writing this my wife dropped her phone and then texted me she broke her screen. So you have to be prepared for anything large expenses 500 more usually job loss, you know, if you have to move for a job, having that emergency funds going to be real critical. car repair those those can be astronomical times, and medical emergency obviously, you got to pay the amount before your insurance kicks in. And next episode, I talk about insurances. So, yeah, that’s going to be good.

5:44

People tend to also forget that you need to prepare for natural disasters as well. So I’m not saying you need to be a doomsday prepper style person but why not have some food and water storage So now it also be probably a good time. This isn’t necessarily outlined in the the free personal finance course the church puts on but it might be good to have a one month food and water supply at this point or to start building that up as well. And then when you move on and get your three to six months emergency fund of money, then you can start working on building up to, you know, six months and then from there up to a year of food and water supply if you’re able to store that at your house, right. So remember, after you paid off your consumer debt, that’s when you move on to that six month, up to six month emergency fund, you know, if your job pays you, you know, seasonally or your hundred percent sales commission or whatever the or maybe your wife just doesn’t like dealing with risk or stress. You need to get a six month emergency fund and for myself, I kind of thought Just a little bit, I say like, Look, if we lose my job or something crazy happens, then we’re just going to spend less money, like we’re not going to go out, we’re not going to eat out, we’re not going to do as many things. So, you know, my emergency fund might be a little bit less than you guys, because I’ll say instead of paying our you know, for whatever thousand dollars a month that we spend, on average will cut that off $500. So I might fudge a little bit. And that’s okay. I feel, but to fudge much more than that and say, you know, we usually spend $4,000, and now we’re going to spend, you know, $2,000s just unrealistic, right? Unless you have a year supply of food or whatever, then maybe you can stretch it right. But I have to say something that really inspired me was a church leader as I was growing up and my youth, he lost his job and he had a job search for a whole year. And so he sold his extra car, and then they ate their one year food storage. And then he was able to find a really good job. I am surprised he wasn’t able to find anything in between that time, you know, but you know things can happen especially in his case he was highly specialized right. And so he was very grateful that he had listened to the prophet and others who have said, you know, you’ve got to have food storage, you’ve gotta, you know, be financially fit, and you’ve got to be self reliant.

8:33

Okay, that was Episode Three, show notes and how to gain access to the resources from the nine principles course that I put together can be found at money for average Joe’s com, just subscribe and you’ll have full access for free. Now remember, be cuz you’re educating yourself. You need to now apply what you’ve learned. So you can gain new skills, have fun and have more money for when it matters most. The show social media how Tech is ma Joe’s, no apostrophe. Please take the time to share something you learned. This show you how to remember is for general education. I am merely a financial coach. I’m not certified advisor or planner. I have not reviewed your situation. So this episode is not considered personal financial advice. This is just education. I’m Jason Weaver with money for average Joe’s, have a good day, and we’ll see you next time.

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