Financial Preparedness

Recently we have been going through a bit of a financial strain.  Who am I kidding?  We seem to always be in a financial strain.  Ha ha ha.  But recently I have been thinking more and more about how to be more prepared financially. 

I hate the fear that lack of money gives me.  I feel safer when I seem to have some money in the bank.  I feel secure.  But the money never seems to last very long.  There always seems to be some sort of "thing" that comes up where we need to use our money.  A refrigerator dies and needs to be replaced. A child needs dental work to the tune of $1200. Something always seems to come up and we have to spend our little (and I mean little) nest egg.

Years ago we took a Dave Ramsey course and it was great.  It allowed us to see where our money was going and we learned how to reduce our debt.  We used this method for quite a while and we still go back to it from time to time.

Dave says to have 3 to 6 months in income in a savings account for emergencies.  He also says to have a budget for cars and car maintenance.  He says to put money aside each month and then when your car needs repair the money is there.  When your car needs new tires, the money is there.  This makes total sense to me. But {sigh} I never seem to be able to do it. Ramsey encourages us to use cash.  Put the cash in an envelope each month labeled for that specific category.

I remember my grandmother telling me a story years ago where she was using envelopes to put money in each month for different things: groceries, clothing, car maintenance, etc.  Her story goes on to tell how she didn't know what to do with the extra money each month that she didn't spend. That never happens to us.  I found that I had to steal money from another envelope to make up the difference in spending from another envelope. {sigh, again}. 

Having a cash system is hard.  In this day and age we don't use cash that much.  Everything is done online, through debit or credit card, or with electronic transfers.  I considered opening a host of bank accounts to settle out the "envelope" system but that didn't seem practical.  I tried a spreadsheet, half-heartedly I admit, but that seemed very tedious.  Lots of detail and saving receipts.  It didn't work, and I admit, I didn't give it much of a chance.

However, one thing that we have done over the years pretty successfully is to put a bit of cash in a jar.  We dip into it from time to time but it usually has a final purpose, like Christmas budget, or travel funds, etc.  It is nice to know that a bit of money is stashed away for something or for an emergency.  We usually have several hundred in there and sometimes it increases to a thousand!  My husband puts his change in there and any cash he has on hand. I do the same when my purse seems heavy with change and when I end up with a bit of cash.  It makes me feel good to contribute to our jar and it makes me feel safe.

Having a bit in an emergency fund is helpful for all those little emergencies.  Like that refrigerator or the dental work.  I am lucky because when those emergencies come up, while I hate to spend the money, we have it and don't have to get a loan or use a credit card to pay for it. Recently with the dental work, the account manager was going through the upcoming expenses and she said that I could apply for a short term loan through a financial company they use.  I could apply right then if I wanted and it only took 5 minutes.  {whew} Thankfully, I was able to decline because I knew we could pay cash for it.  When it came to paying for my daughter's invisilign braces, we were able to take advantage of a cash discount if we paid for the whole thing up front.  It took all our "emergency" money but I was able to save about $500 by paying up front.  Now we are paying "payments" back to our emergency fund instead of paying a high interest loan payments to financial company for the loan for her braces.

How do you get started? 

There are a couple ways to begin.  One thing is to start a list of things that you might need money for in the next year.  Think about appliance replacements, repairs, travel money, etc.  Then start to budget for that expense in your monthly budget.  Divide your total by 12 and add that amount each month.  Watch out and be prepared because that number can be quite large.

For us we can't always make that amount each month to put away.  For us, we just start adding whatever we can to our savings account.  We try not to dip into it each month and I like to see the money start to add up.  Even if it is just $20 a month that you can stick in a jar in your closet.  At the end of the year you will have $240!  Some months you may have an extra $10. Add that too. 

What if your budget is so tight that you can't seem to part with any money to save?

Start by adding all "found" money.  That penny on the sidewalk, the surprise $5 you found in your jacket pocket, change back from ordering a soda.  Then look at what you might be able to take out of your budget.  Maybe take your lunch instead of eating out once a week.  That is an extra $5 a week ($20 a month).  Perhaps it is your birthday money you receive from relatives. Start an emergency fund with money you earn from a yard sale or by selling an item online. 

Other thoughts:

By having insurance on your home or rental insurance you are saving for an emergency also.  Having this insurance will help replace lost or stolen items in an emergency situation.  Your house floods, your insurance will kick in.  But make sure you understand what is covered and what is not covered.  Make sure your insurance covers your needs if a disaster happens.  Know what your deductible is and save that amount in a savings account so your insurance will kick in immediately when you need it.

Health insurance is also important for peace of mind.  Again, know your ins and outs of your plan and save the deductibles.

Think about life insurance too.  Term life policies can be very inexpensive and can be for all sorts of amounts.  Recently, a friend had the horrible experience of having to bury her teenage son. The cost of the funeral home and burial was very expensive and they didn't have that kind of money.  They had to take a loan out to get their son buried.  It was a very sad situation and one they had not expected nor planned for.  Not only were they mourning and grieving horribly but also at the same time had to deal with the payments to the funeral home and cemetery.

Reality:

In full disclosure, we don't currently have health insurance or life insurance.  This is something that we need to get taken care of soon and on my list of things to do.

We do have a small fund of cash in a jar and we are currently saving for Christmas and then for travel later in the year.  We put all found money in there and whenever we end up with cash.  Extras from the month will also go in there. When we need cash we tend to dip out of it and I hate that, but it happens. I always say I will take cash out of our bank account and replace it but in reality that rarely happens.

I write this post not only to help spark some ideas for you but also for me to get organized and help me get more prepared as well.

What creative ideas do you have to save money for emergencies?