Once you have figured out how much you’ll need in your emergency fund, then we have to build it. Let’s start with one cold, hard fact: It is impossible to build your fund if you spend more than you make and live outside your means. In other words, you’ll be required to have to ability to regularly save. The more you save, the quicker you get to you goal. Say your goal is $30,000, and you’re able to save $1,500 per month. Then it will take 20 months to reach your goal.
It’s one thing to know what to do, but another to be disciplined enough to do it. Saving is a very difficult task for most of us. Only 20% of Americans are prepared for a $400 expense.1
So we have some tips and suggestions below and these can be applied really to any savings or investing goal you may have in the future.
Tip #1: Track your progress
Put a chart on a wall and track your progress. You can build a chart with software like Excel or you can actually create one online, and then use a pen to track your actual progress over time. Make sure you put it in a place that is visible all the time. If you don’t want to advertise your goal, then put it somewhere private like your bedroom.
Tip #2: Keep yourself accountable
If you aren’t a client already, then you’ll need someone other than your financial advisor to keep you accountable. A very helpful tip is to have a trusted person, a friend or loved one, take on this role.
There are two requirements to keep in mind:
1. Make sure that you can trust this person and that this person really has your best interest at heart. You also want to make sure that you’re not getting feedback with judgment as that is simply not constructive.
2. Make sure that whoever your trusted person has at least some financially healthy attributes. If they are drowning in debt, they can’t even help themselves, let alone help you. Make sure they have the right habits.
Have this trusted person check in with you on a predetermined, perhaps monthly, basis to see if you are keeping track of your goal. If they really have your best interests at heart, then they will actually be glad to take on this small favor.
Tip #3: Practice Self-Compassion
Whenever we set a goal, we are deliberately stretching our capabilities. Take stock of that and take stock of the fact that you will, at times, fall short of your goal. That is okay. There is a two-steps-forward-one-step-back nature to growth. It will happen, and you will fail at times.
The last thing you want to do is to beat yourself up. So long as you are making progress, even if it is baby steps, it is okay. You will eventually arrive at your destination, even if you get lost with some detours on the way. But beating yourself up is the equivalent of deliberately crashing your car into a lamppost.
Failure is part of the process. Be kind to yourself, especially when you do fail.
Tip #4: Surround yourself with a new crowd
As the saying goes, birds of a feather flock together. This is not only true about a person’s character, but also their bank accounts as well. If it’s difficult for you to save your money, maybe one of the first things you can do is to look around and see who you are hanging out with. If everyone you hang around with is dealing with money issues, always short, diving deeper into debt, it shouldn’t be a surprise if you have similar problems.
You have the choice to change your surroundings and to change your own situation as a result. It does take courage because you’ll have to close some doors and open some new ones and it takes patience, because old habits do die hard, but it can be done over time.
One of the best ways of changing your surroundings is to become a client and hire a qualified advisor. It’s almost a sure bet that they will have the right mindset and you are at an advantage because you are learning by osmosis.
If you are not a ConCapper, don’t hesitate to reach out to us to see how we could help in your financial independence journey. Visit our Requirements page to get connected.
Sources:
1 – (2021, May). Economic Well-Being of U.S. Households in 2020. Board of Governors of the Federal Reserve System. Retrieved on September 28, 2022 from https://www.federalreserve.gov/publications/2021-economic-well-being-of-us-households-in-2020-dealing-with-unexpected-expenses.htm
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