Personal finance always seems so straightforward and easy to understand on paper. It is when these principles are put into practice that things can get tricky. A recent report for MSN money by Liz Weston suggests that Americans as a whole have a serious problem saving money for an emergency fund. Her figures show that only about 30% of households have enough money saved to last them for three months worth of expenses. This is an abysmal number that only goes to show how far we have to come as a nation in order to get our financial house in order. This is the case even if our own government is not able to do the same for itself.
While it is easy to ridicule the government for its lack of financial discipline, perhaps this is also a good time to look inward and see what we can do as individuals to make our financial lives better. Sure, it is ridiculous to see our politicians scrabbling around looking for solutions to our national debt crisis, but this could be you shortly if you do not get your finances in order. This is something to keep in perspective when thinking about these issues.
Most experts recommend an emergency fund that has enough cash to keep you sustained for at least three months time. Many more say that six months worth of cash is a safer and more realistic goal in these tough economic times. Having this kind of emergency fund helps protect you against things like losing your job or some unexpected medical expense.
For those of us in the Nashville area, the validity of having an emergency fund could not be clearer. We can all recall the floods that happened in 2010. This terrible natural disaster costs dozens of people their lives, and many more lost their homes and livelihoods. With something as emotionally and physically painful as this, there is always an economic cost as well. Many people were completely devastated by this financially.
This is not to say that a three month or even a six month emergency fund could have made everything right in this situation. In fact, for most it would have taken a lot more money than this. However, those emergency funds might have helped to establish some normalcy to lives all across the Middle Tennessee area. It is just one more way to highlight the massive importance of emergency funds.
All of this is not to be down on anyone for choices that they have made in the past. It is not to call attention to the fact that you might not be prepared for disaster. Rather, it is a call to action to get your financial life in order so that you will, in fact, be prepared. It is perhaps one of the best decisions that you could make in your personal financial life.