How protective is your emergency fund?

By Jennifer Langley

Everyone should have an emergency fund regardless of their age or financial status. Not only can one of these funds protect you in the event of an emergency, but they are also a great way to learn about the importance of saving money. Even if you are just getting ready to move out of your parents' house for the first time, you should already be considering how much money you can put into your emergency fund on a monthly basis.

How to build an emergency fund

Most people in the U.S. live paycheck to paycheck, and this can make it very difficult to put any money aside. Unfortunately, these are also the same people who will find themselves in the most financial trouble if even one thing goes wrong. Therefore, it is necessary to make some sacrifices in order to build an emergency fund.


Even if you can only afford to put aside $5 a week, it is better than nothing, and over the course of the year you will save $260. Hopefully you will not have to touch the fund for many years, but if you end up with an unexpected car repair or other issue, it will be much better to have even $260 set aside than no money at all.

Why do I need an emergency fund?

Life is unpredictable, and it is always a bad idea to use a credit card to deal with an emergency situation, especially if you have limited financial resources. Consider for a moment where you are going to get the monthly credit card payments from before you simply move forward with a credit card purchase.

If you do not have an extra $100 a month to make a credit card payment, then you are not in a good position to rely on a credit card. Instead, you should have your own emergency fund in place that will help you replace your transmission, pay for a medical bill or cover your expenses if you miss a couple of days of work due to getting the flu.

No matter how well we take care of ourselves and our possessions, things will inevitably break down and we will eventually become sick. Therefore, the only way to keep ourselves from becoming buried by debt is to dip into an emergency fund instead.

What if I really cannot afford an emergency fund?

There are very few people who actually spend every dollar that they have in a careful way. Consider what your current bills are, and whether or not you actually need to keep all of them the way that they are. For example, if you have premium cable channels, you could easily save $20 or more a month to put into an emergency fund by canceling them.

Keep in mind that there are cheaper entertainment alternatives such as Netflix Instant Streaming if you are a movie addict. Another thing that a lot of people spend money on is a daily cup of coffee. Instead of getting it from a restaurant, you should make your own. The money that you save will give you a nice start to your emergency fund.

What if my emergency fund does not cover my expenses?

There will be some instances when your emergency fund will not have enough in it to cover all of your expenses, but it is always better to cover as much of the cost as possible from your fund. That way, if you do need to get a loan or use a credit card, you will be able to pay it back more quickly and in smaller installments.

This article was written by Jennifer Langley. Jennifer is an avid finance writer who stresses the importance of protecting oneself before venturing out into any endeavor.

* All images US-PDGov

Apocalypse on a budget: How to prepare

 Image attribution: Freedigitalphotos.net; standard royalty free license

An apocalypse requires more financial planning than a smaller disaster because the affects are more widespread. If the probability of an apocalypse is high, more reason exists to utilize part of one's budget for that apocalypse. When budgeting for any apocalypse, reallocation of funds into non-conventional currency such as seeds helps ensure wealth in a post-apocalyptic era per Recession Ready America. Once an apocalypse strikes, traditional money management techniques change along with the value of assets, but the principles stay the same.

Ice Age

If an ice age is imminent, then preparing for that ice age would be a logical consideration within a budget. Depending on where one lives this could involve seeking affordable sources of home insulation and investing in alternative food sources to prepare for a rise in food prices associated with the decrease in global agricultural land. Self-sustainable heating resources such as active solar heating outlined by the U.S. Department of Energy can be used to save money regardless of an apocalyptic occurrence, and is consequently also a way to hedge one's budgeting for an ice age.

Nuclear

Budgeting for a nuclear apocalypse may require a second mortgage or access to radiation protected food and water. The Oregon Institute of Science and Medicine states unsurvivable nuclear winter is a myth and that dust tight containers, and deep wells would not be contaminated by nuclear fallout. For those seeking nuclear residences Popular Mechanics reviews six types of bomb shelters one of which starts at $40,000 and includes filtration systems, and another called the Earthcom Dome which starts at $420,000.

Deluge

After worldwide massive flooding caused by global warming the sea level rises circumstances change. Naturally, this would make higher elevations more favorable and influence the price of inland real estate. Budgeting for deluge includes things like emergency supply kits recommended by the Federal Emergency Management Agency (FEMA), flood insurance, boating and fishing equipment are investments that would be more likely to pay off in a deluge apocalypse. Moreover, since there would in effect be more sea, ocean and rivers and less land, water related food sources such as fish would increase in contrast to land sources.

Earthquake

Massive earthquake activity on a global scale can domino into an apocalypse if the affects are compounded by tsunamis, and ensuing destruction of global infrastructure. Earthquake related apocalypse, as with many types of apocalypse, can necessitate an alternative living arrangement. The New York Times natural disaster map illustrates the safest places from an earthquake in the United States. If such arrangements are postponed, travel expenses and food expenses will have to be accounted for after an earthquake related apocalypse. 

Economic

James Buchanan of the Cato Institute emphasizes the need for security in anarchic settings that conceivably would coincide with an economic apocalypse. In other words, since an economic apocalypse involves a failure of the world economy such that the majority of the global population can no longer realistically sustain itself, a high competition for limited resources would ensue. Moreover, budgeting for security in this type of apocalypse is plausible because the economic resources that once funded public services would become limited.

Tips for Achieving Security In an Uncertain Economy

Achieving financial security in an uncertain economy may involve 1) acknowledging a financial reality, 2) tackling tough financial problems such as debt, spending, budgeting etc. and 3) finding solutions to improve a financial situation. Financial security is multifaceted in the sense it includes financial planning, relationships, physical safety, emotional stability, and personal happiness.

Achieving financial security in today's economy can be assisted by wise financial decision making, and keeping income above the cost of living so as to facilitate savings and investments. Obtaining financial security demands know how, life agility, toughness, and a belief in oneself.

To believe in one's ability to make the most of all parts of one's life is an important starting point in achieving security. Once one has conviction in one's goals and dreams the next step is to act. The following paragraphs illustrate some of the important ways security may be achieved amidst an economic environment of corporate downsizing, frequent layoffs, changing employer needs and employment competition.

• Develop skills that fill economic needs

Skills that are in demand pay well. Economic trends and rises in the demand of various services and salaries are an indicator of demand. For example, as the baby boomers start retiring the demand for health care workers is expected to rise. There are many different professions within the field of health-care, some of which may be just what one is looking for with good pay to match.

• Improve psychological fortitude

Life and uncertain economic conditions can bombard one with rejection, fear, doubt, struggle and many other negative and unpleasant things. Being able to function normally and happily within such potential conditions requires psychological strength. Such strength can take years to build and minutes to fall apart. Consulting self-help books, thinking about how to approach situations differently and developing trust and reliance through perseverance may be what is necessary to build such psychological strength.

• Utilize time

Time really is money and unfortunately there are only 24 hours in day and 168 hours in a week. Since any time spent not working for pay, is money not earned that time is a financial loss if one values money. The week can be broken down by percentage as follows:

33% is spent sleeping on average, roughly 5% is used up on driving places, another 10-15% or so is spent eating and cooking, 4% in the bathroom, 8% on housekeeping, 2% on errands and 10% on entertainment. That leaves approximately 38-40 hours to make money. One can either optimize those 38-40 hours by maximizing one's income whenever possible, or reduce the amount of time doing other things to make more money.

• Live within financial means

Everyone knows one can't spend what one doesn't have. The difficulty lies not so much with the concept but finding a way to actually stick to a budget and live happily at the same time. Living within one's financial means not only means budgeting in some way it also can mean learning to be happy with what one has. It is possible to be happy without more things it just takes effort.

• Build other sources of security

Not all security is financial whether it be an uncertain economy or not. Security can also mean emotional fulfillment, spiritual peace, strong relationships, good mental and physical health etc. Building every aspect of one's life as much as possible can mean a more secure, fulfilling and happy life. To build other sources of security may be easier than building financial security because it involves different parts of life such as relationships, philosophy, art, exercise etc. All of which can assist one appreciate life more fully.

• Put money away

Saving is important because it builds security and can help finance a future retirement and unforeseen expenses. A penny saved is a penny earned and pennies are a plenty. If one has to start saving with pennies why not. If having a giant jar of pennies makes one feel secure it is a good place to start and train oneself to save daily.

Whenever there are a few extra dollars to spare, save them. In time dollars add up just as pennies do. Cutting back on small expenses that don't seem a lot can also help save money. Making small financial sacrifices for the sake of saving can help bring financial security or at least a sense of financial direction which can be comforting.

To summarize, security is a both an actual condition and a psychological feeling. What's more, money isn't everything, but it is also quite important. This article has illustrated some of the ways by which security can be achieved in any economy, whether it is uncertain or not.

Since security is also a psychological term, there are also psychological aspects to the 'feeling' of security. While one may never be entirely secure, a belief in oneself, conviction in one's values, in addition to pragmatic steps such as time management, skill development and monetary prudence are all useful means by which to improve and attain a greater security.