This series of blogs will talk to you about the importance of paying yourself first - the most powerful money management system I have ever known. Introduced to me in a seminar by a success coach last year, then tested and proven by the best selling personal finance authors I have come across in my self-education, this simple-yet-effective wealth management is the best thing that I've ever known about money and this can help me and you keep track of on the road to financial prosperity and freedom. And I wouldn't preach about this if I don't walk the talk.
If you got here by accident, I advise you go back to the introductory post about paying yourself first here so you could go along with the ride smoothly.
After reading the previous post about your regular and faithful offering to Him, which is the most important aspect of paying yourself first, I'm sure you have finally realized how happy and healthy it is for you to actually give back a portion to the Provider of wealth.
Normally, the "pay yourself first" is a certain percentage of how much you have to set aside as savings and investments before you actually use what is left for spending and cost of living. How much you are going to set as savings is really up to you, but if you have to start changing your financial beliefs and creating a wealth mindset in preparing and securing your future, doing this faithfully can be a remedy to your worries.
One vital part of your wealth management system is having an emergency fund.
Basically, an emergency occurs when an unexpected situation that requires immediate action and obviously without delay. With a financial emergency, you never know what to expect with the money you need to spend for.
You meet an accident, like the example above, you need money for medications and other expenses.
Your car breaks down. You need money for repair and future maintenance, if any.
The roof in your house is destroyed, allowing leaks into your house. You need money to fix it.
Having an emergency fund with you gives you a peace of mind that you do not have to panic where to get money when you need it most. It is something you cannot miss when paying yourself first, no matter how much you are setting aside every payday. On a 70-30 system where you pay yourself first with 30% and live with the other 70% - like I practice - dedicating 10% of it to your emergency fund can be a good idea.
Traditionally, an emergency fund should be worth at least three to six months' worth of your monthly salary. This implies that whatever happens to you or to your loved ones- hospitalizations, loss of job, other inevitable events that are classified as emergency - within that period of time, you are most likely to be protected with the money that is made available and accessible to you.
Since you would need that emergency fund as soon as possible, you might want to put it in a bank account, where it is the easiest and most convenient way to access your funds. You may not want to put it in an investment account, where it may take a couple of days before you get your funds (I'm not saying that investments are a hassle; since we focus on your emergency fund, make it act like you need it on the next minute or so).
So in case you need money to fix a certain item, or for inevitable admissions and medications that are required for you to take, you don't need to sacrifice a whole lot of your cash on hand for them, especially if you don't pay yourself first often. But with the discipline and faithfulness to put up an emergency fund of your own, your potential financial disasters may be well taken care of.
One vital part of your wealth management system is having an emergency fund.
Basically, an emergency occurs when an unexpected situation that requires immediate action and obviously without delay. With a financial emergency, you never know what to expect with the money you need to spend for.
You meet an accident, like the example above, you need money for medications and other expenses.
Your car breaks down. You need money for repair and future maintenance, if any.
The roof in your house is destroyed, allowing leaks into your house. You need money to fix it.
Having an emergency fund with you gives you a peace of mind that you do not have to panic where to get money when you need it most. It is something you cannot miss when paying yourself first, no matter how much you are setting aside every payday. On a 70-30 system where you pay yourself first with 30% and live with the other 70% - like I practice - dedicating 10% of it to your emergency fund can be a good idea.
Traditionally, an emergency fund should be worth at least three to six months' worth of your monthly salary. This implies that whatever happens to you or to your loved ones- hospitalizations, loss of job, other inevitable events that are classified as emergency - within that period of time, you are most likely to be protected with the money that is made available and accessible to you.
Since you would need that emergency fund as soon as possible, you might want to put it in a bank account, where it is the easiest and most convenient way to access your funds. You may not want to put it in an investment account, where it may take a couple of days before you get your funds (I'm not saying that investments are a hassle; since we focus on your emergency fund, make it act like you need it on the next minute or so).
So in case you need money to fix a certain item, or for inevitable admissions and medications that are required for you to take, you don't need to sacrifice a whole lot of your cash on hand for them, especially if you don't pay yourself first often. But with the discipline and faithfulness to put up an emergency fund of your own, your potential financial disasters may be well taken care of.
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