Anchoring Your Seed
Strengthen your roots with Money Seeds chapter four. The roots ground the tree where it stands and ensures that it will not be moved by the elements or other influences around it. You’ll want to develop your emergency funds' roots to withstand the toughest of setbacks, obstacles, and inclement circumstances. Only then will you be fit to reach toward new heights.
Active Saving
In chapter 2 we discussed monitoring your expenses and budgeting properly as a means of passive saving. Building from the basic principle of retaining more of your income, we can now take a step further with specific goals and actions. To this end, you must save actively as if it were another fixed expense. Another factor outside of the realm saving comes job security. During the period of preparation and building your foundation you’ll want to stabilize your income as much as possible. Both of these technique will prove fruitful over time and pay off with a hearty emergency fund and moreover, start up capital!
Unlike passive saving, active saving requires more diligence and intent. Rather than preventing yourself from incurring high expenses you should now treat savings like a fixed expense in your budget. There are a couple ways to do this.
- Pay yourself first by saving 10% of each check you receive immediately.
- Pay yourself daily by saving $10 dollars each day.
Start by opening a saving account with your current bank then move funds from your primary account at intervals of your choice. Per your income and comfort level these rates can change, but the principal should always remain the same. Pay yourself. One must also take extra precaution to not spend the money accrued on useless goods. All money in no money out!
Stick With The Plan
Maintaining your primary source of income is most important during this phase because any fluctuation of money can lead to the exhaustion of your savings account which puts you back at square one. Rather than risk your limited capital on entrepreneurship or investments, double down on work, taking more hours and increasing the revenue stream to build up two major reserves: your emergency expense fund and your emergency buffer.
These do not have to be separate accounts, but they should be thought of independently. The emergency expense fund should be the total of your most basic expenses multiplied by three. This method gives you three months of security in the event you are laid off or face unforeseen circumstances. The average person will likely take three months to recover from a life altering incident or find a new career. In this case, you will not have the added pressures of taking loans from family members or even worse, banks. Once you’ve acquired your emergency expense fund, work to establish an emergency buffer. This number can be defined by the individual, but we recommended to have at least $2,000. This additional money serves to prevent the use of your emergency expense fund and acts as a first line of defense.
One must also take precautions to replenish each account in the event that the funds are needed, before engaging in any extracurricular activities. Developing this happen will not only further establish the importance of the fund, but it will also keep you covered for the next emergency. Only once you have the privilege of financial stability that results from a hearty emergency fund savings fund can you start to make strides toward a second stream of income without exposing yourself too much risk.
Continue beyond Money Seeds chapter four here.
