Saturday, January 15, 2011

John's Money Tip number 3

Today we will be talking about a financial concept that many people miss. This concept is what I call, "creating margin" So what does that mean?

Life creates a lot of unexpected events for all of us. For example, cars or appliances breaking down, unexpected insurance increase, medical emergencies or people we who need some financial help. I could go on and on but I think you get the point.

So the way we prepare for these unexpected events is to create, "Financial Margin" which to begin with saving a $1000.00 emergency fund. Margin does something to our thoughts and emotion. First, we don't panic, we feel empowered because we have taken charge of unexpected problems through preparation.

Now, many people may say at this point, 'I don't have the extra funds to save $1000.00. Over time this can be done by anyone. You start with small increments - let's say all you could save in one month was $50. You will have an emergency fund in less than 2 years. But realistically most of us can do more. If you save $100 a month you will have your emergency fund in 10 months. If you try this you will begin to see the value of having margin, it will give you confidence and will more than likely create a desire to begin increasing that fund.

There are some basic rules you apply to your emergency fund:
1. If you use any money out of the fund you always replenish the amount needed to maintain the $1000.00 balance.
2. You never use it for anything other than emergencies


38 Give, and you will receive. Your gift will return to you in full—pressed down, shaken together to make room for more, running over, and poured into your lap. The amount you give will determine the amount you get back.”
Luke 6:38 (New Living Translation)


Meems said...

Mike always says there isn't anything in life that cost less than $1,000 anymore. :-) It's kind of a joke around here.

Frank & Debbie Leonetti said...

Frank and I appreciate your Wisdom John, We stared our ER fund about 1 year ago and replenished it 1 time. It's awesome to know when unexpected things have you have something to fall back on. It is very empowering.

Deborah said...

Yes, it's nice to have that extra security just in case. Another great tip :)