100 Beyond Your Wedding Day Podcast-Big Fat Emergency Fund

by mike on November 28, 2012

100 Beyond Your Wedding Day Podcast-Big Fat Emergency Fund

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In this episode of the Beyond Your Wedding Day Podcast, we discuss the Total Money Makeover by Dave Ramsey.  We take a look at Chapter 8: “Finish the Emergency Fund: Kick Murphy Out.”

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*The third baby step is to finish the emergency fund

-Generally, a fully funded emergency fund covers three to six months of expenses

-Since the last few years, I recommend the six months to my clients

-In order for you to stay ahead (now that you are debt free and already ahead) you have to make sure a job layoff or blown engine won’t cripple you

-A poll in Parenting magazine said that 49 percent of Americans could cover less than one month’s expenses if they lost their income (I would think that has to be less now)

-You must be very clear on what an emergency fund is for.  It’s not for something you should have and could have saved up for

*It’s for something that was unforeseen like a job layoff, covering an insurance deductible due to an accident, etc.

-If you are married, you must discuss, pray about, and agree on using the money after sleeping on it

*Make sure the money is accessible

-In other words, it should be in something you can get to quickly without penalties

-Mutual funds (even outside of a retirement account) are not a good idea because if an emergency happens during a down market, you won’t want to sell them

-CDs are a bad idea too because of the penalties for early withdrawal

-Remember, this is NOT an investment

-A regular savings account or a money market account (with a mutual fund company) with check writing privileges is usually the best place for your emergency fund

*How much should be in your emergency fund?

-As stated before, I lean more towards six months

-Remember, it’s six months of EXPENSES, not income

*Everyone needs to be on board

-Do not clear out a savings fund down to $1,000 to pay down your debt if you are not “ALL IN”

-If, for some reason, you see yourself being in Baby Step 2 for more than 5 years, don’t clear out your savings account

*Men and women view the emergency fund differently

-men tend to be bugged by the emergency fund since it’s not “doing” anything

-women love it because it makes them feel much more secure

*A financial crisis becomes just an inconvenience when you have a fully funded emergency fund

*If you know you have a big emergency coming, stop the debt snowball and pile up money

-Examples could be a baby coming, your employer is closing in a few months, you got a large severance check as you got laid off, etc.

-If you don’t already own a home, after having your fully funded emergency fund is the time to start saving for a down payment on a house

 

Would you like to work with Mandy and Mike one on one?  Check out the Beyond Your Wedding Day Marriage Prep Course.

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