Speaking as someone who just had an unexpected vehicle expense pop up, I can tell you that I ain’t in that 40%. Are you?
It’s not nearly as sexy, but it is true: you are far more likely to experience an emergency calling for your stash of US greenbacks than you are for an emergency that requires your plate carrier and NVD’s.
Part of preparedness is being prepared for the unsexy stuff: water heater failures, alternators, dead refrigerators, broken pipes, exploding appendixes, and other sundry crises.
It’s no secret that I try to follow the Dave Ramsey stuff….and I’ll be accused of drinking his particular Kool-Aid but..it’s worked well for me. The alternator died and what might have otherwise been an emergency was downgraded to an inconvenience. I just took the money from the emergency fund and threw it at the mechanic. Next day…functioning vehicle. No muss, no fuss.
Now I drop everything and work on topping off my emergency fund back to its normal level.
If you set back food, ammo, fuel, and meds ‘just in case’ then you really shouldn’t have trouble understanding that adding ‘money’ to that list is just as good an idea as the other items. The trick is having the discipline to do it and then forget that the money is there.
My financial goal, in case anyone is interested, is a years worth of money to cover my basic expenses – food, utilities, taxes, etc. It won’t be a huge amount since I can live without luxuries, but having a years worth of expenses tucked away gives me options I might not otherwise have in case theres a job failure or other ‘personal’ end of the world.
No lie, man…get a couple grand tucked away as soon as possible and forget that it’s there. It’s the best thing you can do to give yourself some peace of mind that allows you to worry and work against bigger things.
That is really hard to believe. But I think the trend is correct, I notice a lot of my coworkers who go out for take-out during lunch when pay day approaches are joking about low budget foods, couch digging, that sort of thing. This did not occur in years past either.
Thankfully, I’m good for such occasions. And when expenditures occur, I am quick to pay myself 1st. I notice it was easier to squirrel away 15% with hardly ever touchiing the reserve. Now, when insurance policies come into play, I can only put in a bit less than 10%.
Just a tip for readership. If you are in a stable residence, ( your own house, long term form of arrangement,etc.) Pay extra on utilities and build up a credit balance. Almost all of them will accept it and record it all accordingly on your bill statements. Calculate what a good balance amount would be to give a year-18 months cushion. There is no interest if it is in a bank anyway, and do a little at a time, over time. Then just like me! When you lose a job, or get injured-sick,etc. The utilities are getting covered-lights stay on. Then reserve cash can be used for food or other small periodic bills and not those automatic monthly ones that are regular as a sunrise. Strategic thinking.
If a person is disciplined enough to keep their mitts out of the envelope in the gun safe/ savings account I would recommend against pre paying bills.
The reason is that it is inflexible. That $500 balance on the electric means your power is on for awhile but you lack flexibility. It may be that you need to fix a car or pay a doctors bill or buy a last minute plane ticket to see a sick/ dying relative.
Now if a person can’t manage to keep their mitts out of the cookie jar then pre paying everything to protect you from you is a good idea.
RE: pre-paying utility expenses – it’s not an unreasonable idea if practiced in moderation.
I get all my utilities from the same municipal utility, and maintain an *approximate* 2-billing period surplus. During the winter, that may drop to 1 month because heating bills are higher than summer cooling bills. There’s also a 2 month surplus in my internet provider account.
Yes, the money’s “locked up” in those accounts, unavailable (unless I request a cash refund, which can be done but takes a couple of weeks), but is completely separate from the emergency funds (one is an “on hand cash stash” and the other is a moderate surplus maintained in a bank account. the third is a HELOC – home equity line of credit – which is accessible instantly 24X7X365, can be transferred just as instantly electronically, should temporary need exceed what’s in the bank account surplus).
Why “lock funds up” in a utility account? First, if I’m hospitalized I may not have access to my accounts to pay those bills in a timely manner when they come due, second, some day I’m going to drop dead and while there are ample accessible funds to cover utilities while the estate is being processed and the house sold, having a buffer of a couple months will make life easier for my trustees. They’ll easily be able to pay the bills with the emergency funds, but at least they’ll have a month or two to sort things out before the house suddenly gets cold and dark. I wouldn’t want to maintain a 6-month utility surplus unless they were paying above market rate interest, but 1-2 months does not seem unprudent.
FYI, bank funds are routinely frozen upon death, at least for a while, so allowing utilties to auto-debit against a bank account, besides being a not smart move (an accounting error by the electric company can easily wipe out your account), auto-debit against those accounts will stop at death until the bank sorts things out with the executor or trustee, and the automated systems at the utilties will recognize non payment but not know why, and issue the “disconnect for non payment” order.
I pretty much do the same thing but utilizing what I call The Rule Of Twenties; I take my utility bill and round it up to the next 20 bucks. Bills $168? I pay $180.
The next month if the bill is $150 and they only charge me $138 because of the $12 credit, I still take that $150 and round it up to $160 and pay that.
Its usually painless and it gives me one less thing to worry about if the end of MY world approaches (unemployment, injury, etc.)
Yep, exactly when I put $$$ on the gas card to save a couple cents per gallon, I only put in what I intend to spend. I learned this the hard way, after learning a local Stripes would only gaurantee several days before wiping the balance off the card.
A money card is good ONLY at one facility. $$$ can be spent whereever. So stashing that is easier.
I have a quarterly payment for an Aflack insurance payment. Rather than scratching at the end, I install a 1/3 of future payment into envelope each month. That way, its already budgeted.
Unsaid in the article is that if they have something to sell to cover the expense, that item was frivolous. Should have put back the money in an emergency fund in the first place instead of pissing it away on an unneeded item and then having to sell it at a huge loss under duress.
Being a Dumbass rarely pays off in real life.
I don’t look askance at those following Dave, I look at Dave in horror as he is a huge douche canoe. You ask people to pay you to gay up the simplest concept on Earth? Spend less than you make. Dave just sprinkles some Jesus dust on it and sells a course. Okay, sure, not as big of a puke as Glen Beck ( “vote Republican, they’ll bring us 300 year fracking. Where’s that communal wine?” ), but getting in the ballpark. Reminds me of that old mail order scam. Guaranteed to kill mice. They mail you two boards to crush the mouse with.
My workout instructor tells me that to get in shape I need to do more exercise. Is that news? No, of course not. He’s not saying anything that anyone doesn’t know. What I pay him for is to motivate me to actually do it. Ramsey is the sae way..he’s not telling people anything they don’t know, his product is the motivation to actually get up and do it.
Considering that it’s free to listen to Dave on every radio station I’ve heard him on, and he spells out the advice on a daily basis, I’m not certain how he’s asking people to pay him.
Unless you get the extra secret squirrel details going through financial peace, you could always just check out his books from the library for free as well.
Listenership = revenue. The stations pay for his show and then advertisers pay to advertise on it. Same as any other media.
While true, I haven’t ever spent a dime personally to listen to him. Can’t say I’ve ever frequented one of the sponsors or advertisers specifically because of what his shows are talking about.
I particularly enjoy the parts that make me go WTF and tell my wife I love her more and more as I realize how “weird” we are to use Dave’s description.
If that’s weird I must be an alien,went down the”debt road “once(mortage at 20) made me crazy(or was it the Ex wife) and paid off very early.
My insurance agents computer has to be reprogrammed to take a full payment and not monthlys.
True but incomplete. I don’t begrudge Dave his revenue from his books or radio syndication. But he also makes a rather significant chunk of change from referrals to financial advisors. And his choice of advisors, uh … leaves something to be desired.
In an age of low cost, no load index funds, there is no valid reason to buy Class A shares. But Dave’s referrals are to commission based advisors. Anyone is better off with a fee-only CFP referral from NAPFA (napfa.org) than using a commission based advisor.
Hell yes! on that emergency cash reserve.
One month’s cash money, in hand, minimum.
Six is better, and a goal to shoot for.
Anything over that in a way you can get to it, but safer than under the mattress.
That’s “the car is totaled money and it’s Friday afternoon on a three-day weekend” , “I just got fired/laid off” money, or “hit by a bus crossing the street” money. It’s “my new boss is an @-hole and the company is going t*ts-up so I’m out of here” money. It’s “my bank locked up my accounts for suspicious activity on Friday night, and the rent is due tomorrow” money.
And a thousand other possibilities.
All of which can be solved by relatively quick access to a mitt-full of greenbacks, requiring no power grid, no ATM, no bank, no computer, and no outside assistance.
Which buys you time to make other arrangements, and solve your problem, with minimal muss or fuss.
Then, when you’re above water and back on your feet, you pay yourself first, and top that contingency fund right back up.
If you can pull out a Jason Bourne go-to-hell safety deposit box stash, without setting foot in a bank, you’re living the dream.
If not, and you’re not working on it, you’re just potential roadkill on the highway of life.
Stashing cash has been my main goal recently along with getting healthier.
The more extreme an event is the less likely it is to occur. Common sense shows that to be true.
It’s way more likely that I get a surprise bill or need to fix my car then that I play Jericho or Walking Dead for real.
My wife saw the rainy day stash I keep in my bugout bag. She promptly informed me that no one wants to see a middle age Asian guy do a gangster rap video.
Tee Hee! Ditto, substitute “at old white dude”. (and, working on the “FYCS” (F@@k You Cash Stash), fitness, and other features of the liturgy of the First Church Of The Commander )
Arrgh! Proofreading fail! “FAT old whit dude!”
We get no respect!
Cash is getting hard to get for that FYCS..most banks don’t have too much on hand. Bank of America made me order the cash then pickup a week later.
Then find another bank.
These days, paying cash is not only a privacy enhancement, it has also become an important political and economic statement about freedom.
I now make it a point to pay for everything other than airline tickets with cash. (And I stopped flying when groping became official policy.)
If that’s weird I must be an alien,went down the”debt road “once(mortage at 20) made me crazy(or was it the Ex wife) and paid off very early.
My insurance agents computer has to be reprogrammed to take a full payment and not monthlys.
Play Warren Zevons,Lawyers,Guns,and Money in your head while you say”yes honey”and say it may sell in China
Stacking cheap silver bullion is an optimal way to save for that ‘rainy day’. Doesn’t burn, doesn’t rust, invulnerable to fire, and has value the world over. If/when you need it, go to the nearest pawn shop & sell it.
Buying and selling metals involves fees (explicit or implicit) on both ends of the transaction. This expense makes it sub-optimal. Also, the fees at pawn shops are among the most expensive.
Nothing wrong with stacking a little silver, whatever floats your boat. But if you compare the actual costs in dollar terms, cash vs. silver, you probably wouldn’t choose to overspend by that much.
How do I lose money if I sell some$3-4 silver even at pawnshop prices? Stack deep and laugh at inflation. Free Silver farms are still found with hoards of coins from 150 years ago(try to spend that paper)
Silver and other PMs have a lot of utility, but they are no part of an emergency reserve float.
Take your silver dime to the gas station or supermarket on a weekend night, and tell me what you get for it. (Hint: You can’t even get a gumball out of a machine for 10¢.)
You want to put 1/4 to 1/2 of your long-term stash into PMs to prevent your savings turning into Zimbabwean debtbux in a major worldwide financial collapse, we can talk.
You think it’s worth the trouble for anything less than that, and you’re crazy.
Like I said, 1-6 months income in paper money, mixed bills.
Anything beyond that is where PMs come into play.
The place for PMs is as a strategic reserve, not a ready response emergency fund.
Starting with the fact that there aren’t a lot of pawn shops open after a hurricane, earthquake, etc.
So your $12.20 in silver dimes in a pinch will be negotiable for $1, a loss of 92% of value instantly. The way to make a small fortune by depending solely on PMs as emergency cash is to start with a large one.
six months go fast, real fast. i know, I had 6 months reserves and 2007 crisis whipped that fund out. it wasn’t what was saved but what was going out of the account. pay off fixed end and revolving debt is just as important. i have lived it. my cure was sell one car buy a car for cash, sell the cookie cutter house buy a smaller rural home with more land for cash. get rid of 90% of the credit cards no have = no use. i.e. 2% cash back cards do not compute with 7-20% daily compounded interest. Put away food for 3 years, have the ability to grow food. just about every thing the current main stream system media tell me to do. I do the opposite…
Older cash(greenbacks)aren’t recognized by machines and younger cashiers(had to exchange a$10 bill that another customer had because the cashier thought it was fake(it was older than she was)
Spare alternator,starter,belts,hoses,fluids on hand with tools and knowledge should be up there with beans,bullets,bandaids,and stored fuel and can be gotten cheap with a few hours at junkyard(body damage wrecks without a fire are what you want,even new cars get wrecked). They will even let you know when your make and model comes in. Don’t forget to take the girls they can wrench just as well if they don’t worry about”breaking” something
I would recommend that you have a stash of smaller bills and a few rolls of quarters. You can hand someone a $50 or $100 in an emergency and they may not have change. You either pay that amount for $5 or $10 worth of what you need or go without. Think of a natural disaster and the credit card machine will not work but the gas station has gas and can pump it with a generator if you have cash. I advise a hundred ones, a hundred fives, twenty tens, ten twenties a couple of fifties and five or ten rolls of quarters. This or some similar combination can be put back with some discipline over a few months or more. Cut out the waste and put back the savings in a stash. Never remove any but add to it as regularly as you can. Of course have a savings plan at the bank and a retirement account if you can but this rudimentary stash may save your life and hand be carried if you must flee. Be consistent and be persistent.