Guess how much a provider billed me for a recent medical expense (an angiogram)?
Oh, I should first explain that I live in the U.S. You know, the country that thinks it’s okay to put people into debt for healthcare?
Okay, if you’re done guessing, I’ll tell you. $27,000.00.
Yep, $27K.
So, it got me thinking about the importance of an emergency fund. It’s money set aside to cover significant, unexpected expenses. For example:
Medical expenses (like mine)
Home repairs
Replacing a major appliance
Major car repairs
Emergency trips (e.g., if a loved one is ill)
The funny thing is, none of this should be “unexpected.” When you’re young, you don’t know better. But, as you grow older, you realize that any and all of these types of major expenses will occur eventually.
We’ve encountered many of these expenses before — some recently.
We had a plumbing leak that, luckily, occurred right after we came home from a vacation. But, it was an unexpected expense that we couldn’t put off.
A few days later, my son’s car wouldn’t start. Unfortunately, it was more than just the starter and will turn out to be a $3K expense.
Our oven stopped working a few months ago (more repairs).
Earlier this year, the main water line to our house sprung a big, expensive leak. Man, I hate plumbing!
Luckily, this isn’t our first rodeo. We’ve been down this road of emergency expenses many times in our lives. So, we’ve learned to put money aside for an emergency fund vs. dumping expenses onto credit cards with their high interest rates.
However, telling people they should create an emergency fund is much easier than making it happen. Where does this “extra money” come from? How can you save to fund the fund?
Here are a few ideas:
Automatically put a small percentage of your paycheck into the fund.
If you have a cash-back credit card, put those rewards into your fund and pretend you don’t have that money.
Cut some expenses and redirect what you were spending into the fund. For example, I used to spend $2-3K/year at Starbucks! So, I stopped doing that and used the money for more important things.
Review your monthly subscriptions, put some on hold, and cancel others. For example, 25% of households spend more than $75 monthly on streaming subscriptions.
Americans spend an average of $300/month dining out. Reduce that expense by making more home meals and putting the savings into your emergency fund.
Sell some things around the house you need to get rid of anyway (e.g., old laptops, electronics, clothing) and put the earnings into the fund.
Where should you keep your emergency fund? It has to be easy to access, but you don’t want your money just sitting there waiting for an emergency to occur. So, a high-yield savings account is a good place to store the funds so they can keep growing.
No one enjoys unexpected expenses. But, unfortunately, they are a part of life. Having an emergency fund takes away a bit of the pain.
➡️ I go into more detail in the audio, so scroll up, hit play, and listen.
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I’m Larry Cornett, a Freedom Coach who works with you to optimize your career, business, and life. My mission is to help you become a more "Invincible You" so you can live your life on your terms instead of being controlled by someone else's rules. I live in Northern California near Lake Tahoe with my wife and our Great Dane.
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