Blog

Is It Too Late To Build an Emergency Fund?

April 1st, 2020

Today, we are facing a unique global challenge that has resulted in the interruption of many paychecks and the uncertainty of reliable employment. The outbreak of the Coronavirus (COVID-19) has put a stop to our normal routines, but it won’t stop the mortgage payment, utility bills, or any other expenses you may have. Emergency funds are there to make sure you can meet your obligations during a time of duress. “I can still hear my grandmother’s voice in my head when I think about financial discipline,” said Michael Macke, Vice President of Petros Financial Group and co-owner of Woman’s Worth®. “Two of the most important things she would remind me to do were to save a percentage of each paycheck I ever earned (including my allowance), and make sure I had enough money set aside for emergencies.”

Emergency Fund To Battle Impacts Of COVID-19

The main concern right now for many workers and business owners is cash flow for the next 2-3 months, due to the uncertainty of how long the shutdowns caused by the COVID-19 outbreak will last. Although the national emergency bill and other state emergency bills have been put in place to help individuals with their finances, the funds will still take time to trickle to the people who need it. There has been a request from government officials to private entities to halt evictions and foreclosures until the crisis abates. Workers who have been laid off or business owners whose shops or restaurants are shuttered are being encouraged to be proactive and contact debtors, utility companies, landlords, or credit card companies to determine if they will work out deferred or lower payments.

“This is why an emergency fund is essential to your personal and financial health, explains author, speaker and Woman’s Worth® Founder Jeannette Bajalia. She insists it’s never too late to come up with an emergency fund. “There is never a good time or a bad time to address a plan, it’s only the right time.” Having a fund to fall back on doesn’t just make good financial sense it will bring a peace of mind during a stressful time because unforeseen circumstances tend to come with their own unique stressors.

You Never See It Coming

Although there are thousands of reasons to be glad you have some money set aside, you’ll most likely use it for something you never saw coming; this is the essence of emergency funds: being financially prepared in the face of uncertainty. Since this money is there for emergencies, it needs to be accessible quickly. While it’s okay to put this money to work for you, don’t expect much in the way of a return if your money is 100% liquid (which an emergency fund should be).

You keep this emergency fund available because the what ifs of life don’t stop especially when you retire. What if the roof needs repair? What if you need a major appliance repair? What if the car needs replacing? What if you get sick or injured? Many people end up turning to their credit cards but that can lead to added interest and increased debt if they aren’t paid off immediately.

Liquid Emergency Funds

The rule of thumb has always been to set aside 3-6 months living expenses, but it may vary based on each person’s situation. Bajalia urges her clients to take their monthly income before they retired and multiply it by six, so they will be set for at least six months, to be on the safe side. However, you may be more comfortable with a 12-month cushion instead of less. Although you don’t always know what the emergency will be, you’ll be glad to have a significant amount of money there if you need it. Emergencies cause way less disruption in your life and peace of mind when there are funds available to cover them. So, as you’re re-planning to rebalance your portfolio due to the recent market correction, you will want to think about implementing a “now” bucket for emergencies before you make any financial changes. It’s the right thing to do so use this time as an opportunity to replan using a lifestyle protection approach.

Woman’s Worth® Will Help Ensure You’re Financially Prepared

It’s our job to help educate you about comprehensive and sound asset-positioning strategies that mitigate investor risk, so you’ll be less likely to make fear-based decisions in volatile times and be more likely to grow your money to last you into your future; that’s what the emergency fund planning process does. Click here to schedule a consultation and learn how Woman’s Worth® can ensure you’ll be prepared for these times of financial uncertainty.