Emergency fund

Financial Mental Health

Financial Mental Health Is Important

Money Maroon

When we think about health, we typically think about our physical health. We think of muscle vs fat vs cardio. But within health, we must also address our mental health. We can replace a hip and a heart, but we cannot replace our brain (at least not yet). So we must take care of what is happening in our mental space, both consciously and unconsciously. Within our mental health, it is important not to forget that our financial situation affects our mental health. When addressing health, we must address our financial mental health. Without good financial mental health, you cannot have great overall health. Work on your overall health by getting your finances in order.

Your Financial Mental Health

You can work out all you want, and eat correctly too, but if you are stressed and having anxiety about paying your mortgage/rent or affording your next meal, you cannot achieve your best health. Let us face it, when it comes to health, mental health is typically an after thought. With  millions in debt and financial literacy at a low, financial health is even further removed from our consciousness.

Your Financial Mental Health
Your financial mental health is important

Improve Your Finances, Improve Your Mental Health

To improve your financial health, improve your financial security. This basically means that you should become more comfortable with your finances. Become more comfortable with your assets and your liabilities. In a simpler form, know the amount you owe and the amount of money you have. 

Next, to improve your financial security, increase your wealth beyond what it is today. This can be done by increasing your funds and/or decreasing your debts. By increasing your wealth, we mean increase your wealth to the point of being able to handle unexpected costs. Yes, building an emergency fund. This act of having a safety net has an indirected effect on your mental wellbeing. It is a stress relief knowing that you are able to handle unexpected costs. You need not worry about being homeless, hungry or the effect of a car breaking down. Having an emergency fund frees up your mental space to do other things that can further improve your life. 

Comfort Before Millions

While the goal for many is to be rich and have millions in the bank, you do not need millions to improve your financial mental health. Just building an emergency fund will substantially impact  your mental state. In a recent study, it was found that the ideal income point for individuals is about $95,000 for life satisfaction and about $60,000 – $75,000 for emotional well-being. You do not need millions to be happy.

Start Small

To improve your financial health, start small. By making small incremental financial changes, you are most likely to stick with the process and achieve your goals. Slow and steady wins the race.

To increase your wealth, begin small by saving a portion of your income. Start slow. Aim to save at least about 1% of your take home income. Slowly increase the total over time to the point where you can begin to confidently build an emergency fund. Take a similar approach with your debts, begin small. Begin by aiming to owe less next week than you do today (for example, credit card debt and student loans). This can be achieved by buying only what you need and consistently reduce your spending over time. Think about your wants and needs before each purchase. Also, consider using a budget and track your spending. These are the initial steps on a journey to a better financial mental state and financial independence.

Conclusion

When we think about health, we typically think about our physical health. We think of muscle vs fat vs cardio. But within health, we must also address our mental health. We can replace a hip, and a heart, but we cannot replace our brain (at least not yet). So we must take care of what is happening in our mental space, both consciously and unconsciously. Within our mental health, it is important not to forget that our financial situation affects our mental health. When addressing health, we must address our financial mental health. Without good financial mental health, you cannot have great overall health. Work on your overall health by getting your finances in order.

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How to become a millionaire

How To Become A Millionaire

Money Maroon

At one time or another, we have all asked ourselves this question, how to become a millionaire? It may seem impossible, but becoming a millionaire is not. As of December 2020, it was estimated that there are over 46 million millionaires in the world. In the United States alone, there are over 18 million millionaires. To achieve this status, you need to know the steps that will increase your likelihood of becoming a millionaire and consistently apply these steps overtime. 

How To Become A Millionaire?

Whether they realize it or not, every year many individuals take steps to become a millionaire. However, these same individuals also take many steps to prevent  or hinder achievement of this goal. If you are asking how to become a millionaire, consider saving, reducing debt, investing, earning more and repeat.

Save to become a millionaire

Save

On any financial journey, to achieve that goal, you must save. Saving is the basis of any financial plan. If you are wondering how to become a millionaire, generally, you must keep more than you spend. You must save!

Build A Habit

If you are able to save a lot, do so. But if you are struggling to save, start small. Start by saving $50 per pay check if you can. When you can save $75, do so. At first, saving is not about the amount that you save, it is about building a saving habit. Once you build a saving habit, you will be able to easily increase your saving rate. The task is to get use to seeing your money and not spending it.

The Benefits Of Saving

There are plenty of benefits to saving. Not only does saving provide the confidence of knowing that you can handle an unforeseen financial emergency, you can watch your money grow as well. It is a great feeling to see your money grow over time. Additionally, by saving, you are able to contribute to an emergency fund. With a fully funded emergency fund, not only will you have some money on the side, you will have 6 months to a year or more of expenses saved. This will not only serve as a financial back stop, but will also enable you to take advantage of financial opportunities when they arise. 

Take Advantage Of Opportunities

By having a strong savings account, you are able to invest at opportune times (for example when there is a massive sell off in the markets). With money saved, you are able to take advantage of interest rates at an opportune time. By saving, you are able to not only slowly grow your money, you may also be able to turbo charge your money by taking advantage of opportunities because you have the funds available to do so.

Your Buying Power

When saving, also appreciate the rate of inflation and the interest being paid on your savings. Inflation can eat away the buying power of your savings. With regard to interest rates paid, the average brick and mortar bank will provide a very minuscule interest on your savings. Online banks will provide significantly more interest, as such, you should strongly consider having an online saving account.

Pay off debts and become a millionaire

Reduce Debt

One of the fastest ways to lose money is through debt interest payments. By paying off your debts, you are automatically getting rid of this cost.

In some instances, debt financing can be beneficial. For example, if you are in real estate investing, the use of debt can be useful. But most types of debts can be disastrous to your financial health.

If your debts are those of consumer debt, for example credit cards, if you want to be a millionaire, you should pay these off. You should pay off your credit card balance each month. If you cannot pay off your credit card balance at the end of each month, do not use your credit card. Your credit cards are not free. If you do not pay off your credit card balance, you will continue to ask how to become a millionaire because the chances of getting there will continue to elude you. 

The simple fact is, having a credit card balance is expensive, very expensive. The average credit card Annual Percentage Rate (APR) is about 20%.  That is about 20% per year on your credit card balance. Worst than credit cards are typically company cards. Company cards, such as department store cards generally have higher interest rates than that of credit cards. Company cards at times charge 24% APR or more. That is a lot of money.

If you use credit cards, pay them off. Get the rewards, but do not allow your credit card company to charge you. PAY THEM OFF!

Invest to become a millionaire

Invest

Saving alone will not do the job if you are trying to become a millionaire. Saving is the basis of any financial plan, but you must also invest. This could be by investing in the stock market, retirement accounts or investing in yourself. Whatever the route you take, by putting money into a vehicle with the opportunity to get a return on investment that is a multiple of what you put in is one of the best ways to grow your wealth.

Investing does leave you open to losing at least a portion of whatever you invest. As such, ensure that you are comfortable with the possibility of losing at least apportion of your investment. The more risky the investment, typically, the higher the reward. If you are investing in the stock market, note that there are different asset classes that you can invest in, from highly risky to less risky.

When investing, ensure that you do your due diligence. Whether you are investing on your own or using a financial professional. Do your research. Ensure that your financial professional is on the level. We have all heard of Bernie Madoff and others like him. Protect yourself. As always, with any investment or financial opportunity, if it sounds too good to be true, it probably is.

You may also invest in yourself. This may be in the form of your education, financial development or health. Your return on investment may not immediately be financial, but over time it will. Investing in your education may lead to a better job with a higher salary range. By investing in your financial development, you may be able to find ways to keep more of your money. Investing in your health will allow you to keep going, keep learning, less aches and pain, potentially a longer and more rich life.

Earn more and become a millionaire

Earn More

How to become a millionaire? Earn more. This sounds simple and straight forward, but it is not always the case. If you want to become a millionaire, constantly strive to earn more. Whether you are earning more through a promotion at your place of employment or by obtaining a new job, earn more. If you continue to earn more, you will be able to save more, pay off more debt and invest more. By earning more, you significantly increase your chances of achieving your financial goals earlier.

Do not limit yourself to earning more through an employer, you can build one or more side hustles or you can also become an entrepreneur. Be creative in how you earn.

It is important to note that by saving more, you can earn more through interest payments. By investing, you can earn more through a return on investment. The steps of how to become a millionaire are additive and works together to achieve your financial goals.

Repeat

Once you begin to save, pay off debts, invest and earn more, rinse and repeat. You must consistently repeat these actions to achieve your ultimate goal. If not, you may increase your wealth but may not achieve your goal. 

For example, by earning more, you may fall into the trap of lifestyle creep and spend more. The net result may not necessarily be a growth in wealth. However, by earning more, saving more, using the money to pay down debts or invest, the net result is likely to be an increase in wealth.

Conclusion

At one time or another, we have all asked ourselves this question, how to become a millionaire? It may seem impossible, but becoming a millionaire is not. As of December 2020, it was estimated that there are over 46 million millionaires in the world. In the United States alone, there are over 18 million millionaires. To achieve this status, you need to know the steps that will increase your likelihood of becoming a millionaire and consistently apply these steps overtime. Not surprisingly, the steps to become a millionaire are similar to those for achieving financial  independence. 

There are also other ways to become a millionaire, but some are less likely to occur. You may win the lottery or an inheritance from your rich uncle. While possible, these are long shots. Most millionaires became millionaires by saving, reducing debt, investing, earning more and repeating these foundational acts.

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Spend responsibly

How To Spend Your Stimulus Check

Money Maroon

The pandemic has lead to a bifurcation of fortunes. On one hand, a minority of individuals have increased their wealth beyond belief. On the other hand, the pandemic has eroded the wealth of a significant portion of the population. With the clear and far reaching economic effects of the pandemic, the U.S government has employed multiple rounds of stimulus. To those receiving stimulus funds, how you use the funds are as important as obtaining the stimulus funds. If you qualify to receive some stimulus funds, spend responsibly. Take care of your necessities and if possible, take steps toward building and securing your financial future. 

The Year 2020

We all know that we should save for a rainy day, yet, few of us do what we know to be beneficial to us in the long term. If 2020 has taught us anything, it is that life is unpredictable. We are on this rock (earth) for a short period of time and there are no guarantees. To ensure that your family is in a good position financially, building an emergency fund is crucial. Emergency funds make financial disasters routine events.

Financial Disaster 

Financial disaster is always around the corner. In 2020, financial disaster has occurred in somewhat of a snow ball effect that has build momentum as the pandemic has worsen. First came reduce demand for certain work, then came mandatory shut downs, loss of jobs, inability to pay bills including student loans, mortgage/rent and other necessities. Just take a look at your local news and the length of the food lines. People have exhausted the little reserves they had and some have become completely reliant on government stimulus.

Spend your stimulus responsibly
Do not set your money on fire by spending frivolously

Stimulus

If you qualify to receive government aid, whether in the form of stimulus or in another form, how you spend the funds are more important than just receiving the funds. Yes, the amount provided may not go very far, but every little helps. If you are in desperate need for the funds, use the funds to handle your necessities. This includes food, clothing and shelter.  Really think about how you will use your stimulus check. Keep in mind, based on the current political situation, it is unlikely that more stimulus will be on the way. However, If another stimulus bill is passed by congress, it will likely be less than what you have received to this point.

If you happen to be in a situation where you are not in desperate need of the stimulus but have qualified for receiving the funds, it is not time to spend. While some encourage spending to help the economy, to the contrary, it is time to save. Yes, we now have vaccines, however, it is unlikely that life will return to pre-pandemic norms any time soon. As such, the job market will continue to be in flux. Spend time to think of how you can improve your physical, mental and financial health.

Physical, Mental And Financial Health

We have no idea what the year 2021 and beyond holds, but as much as you can, be prepared. Be prepared by taking care of your physical, mental and financial health one step at a time. With the stimulus funds, if you can: (a) save, build or add to your emergency fund, (b) pay down high interest debt, (c) invest and if you are in the position to do so, (d) donate to help your neighbors. 

Generally, it is time to increase your personal safety net. As the year 2020 has shown, it is important to be ready for the unknown. The best way to be ready for the unknown is to be prepare, such that you can mitigate some disruptions that may occur in the future.

Financial stability is not achieved overnight. Financial stability and to an extent financial independence requires small consistent steps over time.

Conclusion

The pandemic has lead to a bifurcation of fortunes. On one hand, a minority of individuals have increased their wealth beyond belief. On the other hand, the pandemic has eroded the wealth of a significant portion of the population. With the clear and far reaching economic effects of the pandemic, the U.S government has employed multiple rounds of stimulus. To those receiving stimulus funds, how you use the funds are as important as obtaining the stimulus funds. If you qualify to receive some stimulus funds, spend responsibly. Take care of your necessities and if possible, take steps toward building and securing your financial future. 

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Growth

The Journey To Financial Independence Is A Marathon, Not A Sprint

Money Maroon

It is best to begin saving and investing as early as possible. The earlier you begin to save and invest, the more time you have to take advantage of compounding. It only makes sense, so while we can all appreciate this simple concept, why do we ignore our financial future until retirement? The journey to financial independence is a marathon, not a sprint. Begin the race today.

The reason we do not begin saving early is often because (1) we think we cannot begin saving because of lack of funds, (2) instant gratification or a combination of (1) and (2).

The Belief That You Do Not Have Enough To Save

Let us dispose of point 1. The thought that we cannot all begin to save “now” is often a fallacy. If you are without an income stream point (1) may be valid, however, this is usually not the case. No matter how little you earn, I can guarantee that if you look back over the past month, you have wasted more than $5. Whether it be on an event, food, dinks, or a random purchase that was not necessary. Saving can start small. Start small. Pay yourself first.

Instant Gratification

The issue we all tend to have with regard delaying saving, is one of instant gratification. Saving is boring, it is slow. If you are beginning at $0, growth will be incremental and slow. For example, if you are beginning the process of fully funding your emergency fund, then process can be a slow and painful process. Painful because to contribute to your emergency fund if you have not been doing so previously, you will now need to change your habits, make a sacrifice and deliberately save. If your aim is to save a year of income, let’s say $65,000, beginning to save will be painfully slow. 

For example, If you begin by saving $500 per month, in 3 months, it is only $1500 without interest. In your mind, you are so far away from your total that it is inevitable that you will become discouraged. In 5 months you will have only saved $2500 without interest, still over $60,000 to go. At this point you may begin to think, what is the point? You may begin to believe that the sacrifices that you are making is too great. This is the point where many quit saving and revert to their old ways.

If you quit your savings plan, what you and many others fail to realize is that the math is simple and true. If you are saving $500 a month, that is $6,000 a year, that is $60,000 in 10 years, that is $120,000 in 20 years. None of the above includes the added compounding interest or the prospect of you getting a raise as you progress in your career, or investing a portion of your savings.

Because the math is so simple, if we are able to find easy ways to take our minds off the slow process, we will be able to make progress.

Set It And Forget It

To keep our minds off the slow process of accumulating wealth at the initial stages, it may be best to set it and forget it. For example, automatically deposit a portion of your income into a savings account. As this is an automatic process, this means that you will at times forget the process. When you remember this process, you will be surprised by the amount that have accumulated. The gratification of seeing this progress working will  no doubt encourage you to continue the process. A feed forward cycle will emerge. 

Dream big
Keep your eyes on the future and your goals

Further, money begets more money. This may be in the form of investing a portion of your savings or the general power of compounding. Your greatest asset in wealth building is time. Keep your eyes on the future and your goals. Think long term.

Take the first step today and begin saving for your future. Set up an automatic deposit of $5. If you are able to contribute more, do so and increase your contribution over time. 

Conclusion

It is best to begin saving and investing as early as possible. The earlier you begin to save and invest, the more time you have to take advantage of compounding. It only makes sense, so while we can all appreciate this simple concept, why do we ignore our financial future until retirement? The journey to financial independence is a marathon, not a sprint. Begin the race today.

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Video Summary

Losing Job

Learn Lessons From Recessions

Money Maroon

Changes

Learn lessons from recessions. Following the great recession, many Americans made a conscious decision that it was time to prepare for the next financial downturn. Many of these individuals actively or passively joined the Financially Independence Retire Early (“F.I.R.E”) movement. During the pursuit of F.I.R.E, these individuals cut back significantly on spending, saved an increased amount of their salary and invested.  

Those Unprepared For Recessions

While many individuals made a conscious decision to change their life, others did not. Many framed the great recession as a once in a life time event and quickly began spending as they did previously. The prices and sizes of homes increased and the length of car loans approached five to seven years. We were riding the high of a decades long bull market. Each year the prediction of a market downturn came and past with new record highs in the stock market and record lows in unemployment.

However, this all came to a screeching halt. We now have a Covid-19 pandemic. Predictably, those who made financial  changes are in a better position than those who did not.

F.I.R.E in a market downturn

F.I.R.E And Recessions

Over the last decade, as F.I.R.E came to the main stream, many in the media came out asking why? Others have announced that it was a futile fad. Some just did not understand why those in the prime of their careers would want to retire. Many further asserted that it would be dangerous to quit your job early. However, let me tell you a secret. Many in the F.I.R.E movement have no plan to retire in the traditional sense. Many plan to retire from their current jobs and instead focus on a passion. In many instances, these passions provide a sustainable income.

Being Prepared

Whether or not you have achieved F.I.R.E, on the path to F.I.R.E, or thinking about F.I.R.E, the Covid-19 pandemic has shown us why you should plan ahead and have a financial buffer. In times like these, those who have embraced the F.I.R.E movement are leaps and bounds ahead of the rest.

Those Who Have Hit Their F.I.R.E Number

Let us look at those who have hit their F.I.R.E number and have retired. With regard to investments, these individuals have investments that have no doubt reduced in value. For some, the drop is higher than that of 20%. However, as understood by many in the F.I.R.E movement, the stock market operates in cycle. Therefore, these individuals are concerned, however, they understand that the market will return. 

A tenant of F.I.R.E is the emergency fund. Those who have hit their F.I.R.E number no doubt have at least six to twelve months of expense saved in liquid accounts. This is their safety net until the market rebounds.

Those On The Path To F.I.R.E

For those on the path to F.I.R.E, these individuals are still working, has been laid-off or furloughed. Like those who have hit their F.I.R.E number, those on the path to F.I.R.E commonly have investments. There is no doubt that their investment portfolio have taken a hit. These individuals also understand that the market operates in cycles. While they are alarmed by the investment portfolio losses, they understand that the stock market will recover. Further, the losses are locked in only if you sell your investments.

Importantly, these individuals have already build up their  emergency fund or on the path to building this fund. Again, the emergency fund provides an advantage over the general public who generally cannot afford a $500 emergency expense.

Lesson

The lesson from the great recession and this current pandemic is simply, plan ahead. This pandemic will have a similar effect as the great recession. Some will begin to implement contingency plans to protect their families. They will live or continue to live below their means, save and invest. On the other hand, many will not learn a lesson, believe this will not happen again and return to living above their means and keeping up with the Jones.

Conclusion

Learn lessons from recessions such as the great recession and the Covid-19 pandemic. See financial downturns as an opportunity to begin the process or continue the process of building wealth and financial security. Journey to financial independence.

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Video Summary

Covid-19

Financially Survive A Pandemic

Money Maroon

As the Covid-19 pandemic expands, starting in the East and now devastating the West, governments are taking actions to limit and contain both the health and financial fallout. The effects of the Covid-19 pandemic are unimaginable. However, a pandemic should not change how you approach your financial future. These same principles apply during the coronavirus pandemic: live below your means, save and fund your emergency fund. By following these principles, you should be able to financially survive a pandemic.

Social Distancing

As countries and states practice social distancing, they are economically shutting down. As residences are forced to shelter in place, multiple parts of the economy shuts down. For example, the transportation industry (including airlines and taxies), the restaurant industry, and the hotel industry to name a few. As these industries shuts down, revenues are down while employees must be paid. In such a situation, unless there is some intervention, layoffs will follow. 

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Layoff Concerns

In the current environment, the prospects of layoffs should be on every employee’s mind. For these employees, next are the thoughts of providing for their families, servicing mortgages, student loans and other debts. These thoughts breed anxiety and stress. More concerning, anxiety and stress lowers the ability of the immune system to fight diseases. This in turn leaves individuals more susceptible to diseases.

But not everyone is having financial anxiety.

Financial Independence

Over the past ten years, many have tried and have achieved financial independence. Many have exited the daily grind of working for others and have become their own bosses. For many, even with the current fall of the stock market, their financial future is stable no matter the out come of the pandemic and the related financial effects. These individuals are truly financially independent. 

How did these individuals achieve this peace of mind? They followed these basic money principles: live below your means, save and fund your emergency fund.   If you have followed and are following these principles, congratulations, during this economic crisis you will be ok at least in the short term. Simply put, by following these principles, you should be able to financially survive a pandemic.

You Can Achieve Peace Of Mind

Whether you own your own business or you are a salaried employee, there is a possibility of financial hardship in the future. As such, it is prudent that we all plan ahead for a rainy day. Living below your means, saving and funding your emergency fund takes planning. But also, taking these steps means sacrificing and delaying gratification.

By living below your means, you are able to limit debts, for example, lower mortgage payments and lower car payments. By not keeping up with the Jones, you are better able to weather the financial storm when it comes. Living below your means further frees up money for you to save and fund your emergency fund. 

By saving and funding your emergency fund, you are able to have a greater runway to act during a financial crisis. In times of crisis, cash is king. By having a fully funded emergency fund of six to twelve months, any gaps in income can be made up at least temporarily. As such, you are able to maintain your standard of living while having time to search and potentially find a new job.

By planning ahead and putting away money, you are effectively buying time to maintain your family during retirement or a financial crisis. If you are not practicing these basic principles discussed, begin today. Saving $100 a month is $1,200 in a year, and $12,000 in ten years without added interest. If this amount is invested, your total following 10 years will likely be higher.

The Future

As the number of those infected by the coronavirus increases, pay particular attention to the programs available to financially help individuals and businesses. Federal student loan payments are being delayed for 60 days, while foreclosures, evictions and mortgage are being temporarily suspended. As these programs are outlined and implemented, plan ahead and take the steps necessary to keep your family secure and financially healthy.

Conclusion

As the Covid-19 pandemic expands, starting in the East and now devastating the West, governments are taking actions to limit and contain both the health and financial fallout. The effects of the Covid-19 pandemic are unimaginable. However, a pandemic should not change how you approach your financial future. These same principle apply during the coronavirus pandemic: live below your means, save and fund your emergency fund. By following these principles, you should be able to financially survive a pandemic.

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Emergency fund

Benefits Of Having An Emergency Fund

Money Maroon

“Emergency” and “fund” are the new buzz words of any financial advice. You have heard it and have been told many times to have an emergency fund. How much you should save is typically dependent on who you ask. Some say have at least 3 months, others say have at least 6 months while others have recommended up to a year of your monthly cost of living saved. Whatever the amount you have settled on trying to save, start saving now. On the journey to financial independence, there are many benefits of having an emergency fund.

Financial Stress

Financial stress is not only one of the leading causes of divorce, but also stress and all related pathologies. This comes as no surprise in view of recent reports. Survey after survey notes that we are not saving enough for retirement. There are monthly reports noting that most cannot afford a $500 emergency without going into debt. Additionally, the average American has over $38,000 in debt. With regard to student loans, in the US, student loans are now over $1.6 trillion.

Less Financial Stress

What would having a months cost of living in a bank account do for you emotionally and psychologically? Would this mean not living pay check to pay check? What about being able to afford that unexpected car repair, and being able to cover that often raised $500 for an unforeseen expense. The stress relief and feeling of well being, yes, these are the benefits of having an emergency fund.

Now, multiply the amount saved by 2, 3, 6, 12, or 24. The more you save, the better the feeling. The more saved in an emergency fund, the less financial stress.

An Emergency Fund Provides Confidence

With less financial stress, comes confidence. The confidence to take active steps in life to better yourself and financial position. If you are not worried about living pay check to pay check, you can focus more on your career, education and/or family. All of which builds confidence. The more you save, the less on a tight rope you live. The more you save, the less reliant you are on your job to pay for the next 1, 2, 3, 6, 12 or 24 months of expenses.

Confidence is the ability to push back when your boss mistreats you or put you in a compromising situation. Having an emergency fund puts you in a position to fight back because financially, you may not be completely reliant on that job. An emergency fund gives confidence and options.

An Emergency Fund Creates Opportunity

Having an emergency fund allows you to take advantage of opportunities. Opportunities do not come along on a predicted timecourse. Opportunities present themselves on a random untimed basis. 

Consider the previous financial downturn of 2008. To many, the recession was a devastating event for all the known reasons. However, to others who had money saved and were able to buy into the stock market at a significant discount or purchase homes at discounted prices, the recession was a massive opportunity. The financial downturn of 2008 was a realized opportunity to many who had the financial reserves to take advantage. 

While the financial downturn of 2008 is an outlier with regard to the size of the opportunity, the same principles apply for the small opportunities that present themselves daily. Those who have the financial capital and confidence to do so, will take advantage of these opportunities. Having an emergency fund will place you in a better position to take advantage of small and large opportunities alike.

Conclusion

An emergency fund is a specific group of assets, typically cash, that are readily available to help one navigate unexpected financial difficulties. These financial difficulties include but are not limited to loss of a job, illness, and/or repairs. Whatever the amount you have settled on trying to save in an emergency fund, start saving now. On your journey to financial independence, there are many benefits of having an emergency fund.

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Recession Proof With An Emergency Fund

Recession Proof With An Emergency Fund

Money Maroon

Recession fears are always just around the corner.  Financial fears typically grow when volatility increases and consumer confidence falls. With memories of the 2008 financial crisis just below the surface, many Americans are wondering, how do I recession proof my journey to financial independence? To recession proof your financial situation, reinforce your emergency fund.

Cash And Your Emergency Fund

During any financial downturn, cash is king. Therefore, it is important to begin reinforcing your emergency fund. Most experts recommend having three months of living costs saved in a liquid account. This total is simply three times your average monthly costs (includes housing, dining, transportation, servicing debt and other monthly expenses). Consider keeping your emergency funds in a savings account, more preferable a high yield savings account or any account wherein you will have easy access to your money.

However, one size does not fit all.  As such, a question to ask yourself is: if you lose your job, how long will it take for you to find a new job? If you are in a profession where the vetting period is in excess of three months, consider increasing your emergency found to at least six times monthly costs.

However, for comfort and piece of mind, consider having twelve times monthly costs. By having a years total costs, such a financial cushion will allow for flexibility if the unexpected occurs.

Most Americans Cannot Afford A $500 Emergency Without Going Into Debt

Taking into consideration the fact that most Americans cannot afford a $500 emergency without going into debt, if you are unable to achieve three times monthly cost, save whatever you can. The more you are able to save, the better prepared you are for any financial roadblocks.

Saving is an essential feature of financial independence. Saving takes patience and consistency, but provides peace of mind. After having a comfortable emergency fund, begin paying down your debt. If you lose your job, having to service debt during this period can detrimentally affect your situation. Therefore, where possible, pay down debt.

Conclusion

Recession fears are always just around the corner.  Financial fears typically grow as volatility increases and consumer confidence falls. With memories of the 2008 financial crisis just below the surface, many Americans are wondering, how do I recession proof my journey to financial independence? To recession proof your journey to financial independence, reinforce your emergency fund and pay down debt.

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