2021 is finally here. Many of us wondered if 2020 was ever going to end. I was afraid to wake up after New Year’s Eve find that we were all going to experience 2020 again, like Bill Murray in the movie Ground Hog Day. Fortunately, that did not happen, and 2021 is here. I am pretty sure all of us were glad to see 2020 become history and have the opportunities a new year provides for everyone.
Since there are so many possibilities ahead for 2021, we will take the next three weeks to explore them. Each week we will discuss areas that can dramatically improve your life, the life of your family, and the lives of people you may never know. The desire here is to stop letting life happen to the money and possessions you and your family have and will earn this year and in the future.
2020 had a lot of damaging effects on individual and family finances. The shutdowns throughout the world severely crippled many people financially. Worse, many of those businesses forced to discontinue operations early in the year were never able to reopen. Unemployment, stimulus packages, and other compensations to help those affected still found many individuals and families in dire straights.
Covid-19 effects on the economy have lingered into this year, making it an excellent time to decide and prepare for future emergencies. Many families and businesses realized they were financially unprepared for such events. Most people and businesses did not have any reserve savings for unexpected events, let alone a global pandemic. Experts recommend individuals and families have at least 3 – 6 months of expenses saved in an Emergency Fund. The same recommendation applies to businesses.
Whether the savings is an Emergency Fund or Retained Earnings, it needs to be set aside from any other money saved. Ideally, it needs to be in a separate savings account to prevent getting mixed up and accidentally spent on something else. It also does not need to be placed in any aggressive interest-bearing account. Ideally, one that will not lock the money in the investment for an extended period. The Emergency Fund needs to be liquid and readily available when needed. The best way to view it is as an insurance policy and not an investment.
Hopefully, we will never face another global pandemic in our lifetime. But, there will be other emergencies that occur in our lives. Depending on where you live in there could be floods, hurricanes, tornadoes, earthquakes, massive fires, severe medical conditions, accidental injury, and many other events that are out of our control but can severely impact our lives. That is why it is more important than ever to establish an Emergency Fund of at least 3 – 6 months of expenses for your family.
Some will say half a year’s worth of expenses is not enough, especially if the emergency is severe or long-lasting. However, not having at least three months’ worth of expenses saved puts you and your family in dire straights and at the mercy of others. Also, having at least three months’ worth of expenses saved gives you some breathing room when something does occur.
Besides many individuals, families, and businesses not having any savings for emergencies, many had extensive debt. Because of the payments on those debts, they lacked available cash they had for everyday expenses. Many governments enacted legislation to provide temporary relief from the monthly payments for some of the debt. Not everyone could take advantage of the regulations and still was responsible for making payments each month.
People will say they cannot save enough money for a Fully Funded Emergency Fund because they’re barely or not at all to pay for all of their current monthly expenses. More often than not, those who make such statements aren’t using a budget. They’re merely living by the seat of their pants. They get their paycheck on Friday, and before Monday, it’s gone. Worse than that, they have no idea where the money went. Then they blame their employer for not paying them enough, the government for too many taxes, the cost of living being too high where they live, or a myriad of other reasons. The person they see in their mirror every day is the only place the finger doesn’t get pointed.
I was one of those people, or most of my life, with all of the reasons I didn’t have enough money and couldn’t get ahead. Taking Financial Peace University (FPU) and discovered how to use a Zero-based Budget, that all changed. For the first time in my life, I had enough money to pay all of my expenses on time and even had a little bit leftover. While I don’t have 3 -6 months of savings at the moment, I have been able to pay off three credit cards, one of my student loans, a medical bill, child support arrearages, paid cash for birthday and Christmas presents for my children and grandchildren, and many other things. In fact, due to using a Zero-based Budget, I will be able to pay my car off within the next two months. Once I pay my car loan, I have three more student loans and a personal loan to finish paying off. I plan to pay them off in 2 years or less, and then I’ll be able to save for my Fully Funded Emergency Fund (3 – 6 months of expenses).
With it being the beginning of this year, now is the perfect time to decide to have the savings necessary to be prepared for future emergencies because you know they’ll be coming sooner or later.
Don’t miss next week’s continuation of the possibilities 2021 has for the financial future of you, your family, and others you would be able to bless. Making the right decisions at the beginning of this year will put in motion the actions that will help you realize and experience the rewards of the decisions you make this month.
I hope today’s blog was encouraging to you and provided information to help you and others better handle their financial matters. My purpose through these blogs is to inform the reader about money and financial issues so we all can become better managers of the assets we’ve been given. If you like what you read, make sure to sign up so you can receive my weekly posts. The goal of Take Two Financial Coaching is to provide the necessary information to help families and individuals break the chains of debt, build lasting wealth, and become outrageously generous by changing their perspective around money and finances they have.
For those who are tired of being in the rat race or just want to better manage what they earn, I am available to have a Free 60 Minute Conversation to discuss your situation and how I can help you change it. Go to my calendar at https://ramseycoach.com/taketwofinancialcoaching to arrange a time that works for you. You can also email me at taketwofinancialcoaching@gmail.