Have you ever noticed that when you are saving for something fun, an expected expense for precisely that amount seems to crop up out of nowhere? You've probably heard someone say, "Two things in life are certain, death and taxes." Well, I contend that there are a few more certain things in life than JUST death and taxes.
Whether we are plodding along through day-to-day life or in a situation like the current COVID-19 global economic shutdown, having an adequate emergency fund is critial. Why critical, Stephanie? Well, have you ever noticed that most Short-Term Disability and Long-Term Disability income policies offered through your employer or privately only cover a portion of your baseline wages? Or, that in the situation of a job loss, there is not always an equivalent position immediately available? Or, perhaps you were on a once-in-a-lifetime trip for two weeks in Spain and suddenly needed to make emergency plans to fly home early with possibly border closures pending?
The fact is, life happens. The unexpected isn't always fun, but it's reality.
A few years ago, I began working with a young couple who were both professionals, but often living paycheck to paycheck. While they were not accumulating credit card debt, they could not seem to get ahead. In the process of building them a comprehensive financial plan, we took a financial deep dive into WHERE their money was going month over month. It's amazing how quickly those Starbucks trips or weekend getaways add up. We spent time building them a budget, a budget where savings was built into their "required" outflows. Over time and lots of accountability meetings to check in, the not only saved an emergency fund months ahead of schedule, but continue to keep their emergency fund healthy today. A few months ago, during an accountability meeting, they share a list of recent expenditures that were not in the budget. And, I'll never forget the comment that followed... "Before we met you, all of these expenses would have been stressful, it would have felt like a financial emergency. But, because we were prepared for the unexpected, we were able to make it through this phase of life."
Here's the thing, it wasn't "me" that made it possible. Having a confident financial plan takes a team effort, in my opinion. Yes, it is my job to help analyze your unique situation, but it is your job to take the steps to put the financial plan into action. Through conscious efforts by my clients and my willingness to hold them accountable, together we can make strides toward achieving their financial goals.
This article is meant to be general, and it is not investment or financial advice or a recommendation of any kind. Keep in mind that one client experience may not be representative of the experience of other clients. There is no guarantee of future performance or success. Please consult your financial advisor before making financial decisions. (04/20)