By Joe Globensky, RFC®
The recent government shutdown, the longest in history at 35 days, has re-emphasized the importance of having an emergency fund. As financial advisors, we regularly educate people on the need to have 3 to 6 months of living expenses in an account that can be accessed in the event of an emergency.
Normally I would consider an emergency to be a broken-down car, an air conditioner or furnace going out, or something else on that scale. But what about not being paid by your employer for 35 days? For a large portion of the 800,000 government workers who were living without pay, that’s a BIG EMERGENCY!
If you had someone affected by the shutdown, that is very unfortunate, and we are not making light of it. It wasn’t even their fault. But we are using it as a prime example of how an emergency fund can be the difference between riding it out, keeping your landlord and utility companies at bay, or starting a fundraising campaign to help pay bills.
We’ve all seen news articles or videos of people trying to find money to pay their bills. Asking relatives to help them out. Or calling those who are owed money to ask for a little more time. No one wants to, or should have to, do this under these circumstances.
What You Can Do To Prepare
Since it looks like the most recent shutdown may not be the last, there are some things you can do now that can help in the event of another one. Not one as soon as mid-February, since these are occurring all too frequently. But adjusting your lifestyle now may ease your stress levels if another pay stoppage occurs.
It’s easiest to start with a small goal. Instead of being defeated when comparing your current savings to six months of living expenses, start with a goal of a 1-month emergency fund. Once you have that saved, then try to add a second month. And like the commercial says, “and so on, and so on, and so on.”
While you are building your emergency fund, make smart choices about how you spend your money. Try eating more meals in, or maybe forgo the night at the movies and have a family or friends game night. In fact, here is a list of 100 ways to save money.
At Connections Financial Advisors, we are your friendly financial guide and ally to help plan for your future. Even if that future includes another government shutdown, or any number of other emergencies. If you want help to put a plan in place, or you just want to discuss your options, use our online scheduler to request a meeting or phone call.
And look for more financial tips on our blog.