Page 73 - Book5E

CHAPTER 10
Saving for Emergencies, Periodic Payments, and
Financial Goals
In the day-to-day battle to manage your finances, it’s easy to become somewhat bewildered with the competing messages we often hear— things like “pay off your debt,” “max out your IRA,” “buy a house,” “find a better, higher paying job.” All of these are worthwhile pursuits in our quest to become more financially
secure, but where does one start? What should you tackle first? Well, it’s simple. After meeting basic needs and while you’re in the process of reducing spend- ing, start an emergency fund! That’s right.
What is an emergency fund? It’s a stash
of money held in reserve to be used only
in case of genuine emergencies. Buying
a new car doesn’t count. Neither does remodeling the bathroom or buying a hunting rifle or a new set of golf clubs. Again, it is to be used only in case of emergency. What classifies as an emergency? All sorts of things. Your furnace gives out in the grips of a cold snap. Your teenage driver has an accident and is laid up in the hospital. Your company announces job cuts, and you’re affected. These are all emergencies of one kind or another. If you have an emergency fund, you’re going to be in better shape than those without one. Studies show that those with- out emergency savings are more likely to accumulate debt. It may feel like you can’t afford to have one, but the truth is you can’t afford not to have one. Emergency funds are essential, even for college students.
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Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.
—Ben Franklin