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Have you ever (almost) run out of gas? If so, read on…

Have you ever (almost) run out of gas? If so, read on…

An excerpt from a typical conversation that Stephen (my husband) and I have while driving on vacation:

Shari:  Stephen, maybe we should stop for gas over there, we’re at about a quarter of a tank left.

Stephen:  Shari, stop worrying, we’ll be fine.

15 minutes later…

Shari: Stephen, we’re out in the countryside, maybe we should check Waze, there may not be another gas station close by.

Stephen:  Shari, stop worrying, we’ll be fine.

10 minutes later…

Stephen:  Umm, Shari, we may have a problem.

Shari:  Who could have known?*

*Comment has been edited to remove profanity.

Full Tank= Cash Reserves= Lower Stress

Who hasn’t had a near empty gas gauge with no station in sight?  Or a phone battery at 8% and no place to charge?

I think the resulting stress is caused as much by the “why didn’t I think ahead?” feeling as the actual situation.  Conversely, glancing at the fuel gauge or battery level at near full, well, that gives us a good feeling inside, doesn’t it?

You know what else will give you that feeling?  A cushion of savings.  Money in the bank.  A rainy day fund.

It’s not for the planned things you can see coming a mile away. It’s for the unexpected things you could’ve never predicted. A medical emergency – insurance doesn’t cover everything.   The car repair – which of course happens 2,000 miles after the warranty ends.  The sudden trip across the country to see an ailing family member.  Maybe even a job loss…

Life happens and not always according to plan. A cash reserve will bring some peace of mind for those unplanned moments.

How much do you need?  We recommend at least six months of cash available for your non-discretionary expenses such as rent or mortgage payments.  Of course, everyone’s situation is different, so there is no one answer.

How Do You Get There?

You usually start by saving.  But many people don't have the luxury of saving a portion from each paycheck.  They may have just started working, or they're paying off student loans, paying for children’s expenses and/or college or, well, money’s just tight.

But they still need to have an emergency fund…

So as always, the best way to get started… is to get started.  Sometimes it's the act of simply putting some money aside on a regular basis, regardless of the amount.  Start with what feels comfortable to you.  Saving can be liberating and uplifting in itself. You’re doing something!  Before you know it, you’ll have a nice start to that cushion.  You’ll get there.

Some Other Places to Fill Up

What are some other “financial gas stations” out there that can help you access cash in an emergency?

  • Consider your 401(k). Many allow for borrowing against your balance. Understand the terms - how much you can borrow and what the rate is. And, most important – have a plan to pay back a loan as quickly as possible. I'm not advocating borrowing from your retirement savings as a long-term or first option mind you, but know if it’s available.
  • Do you have equity in your home?  Consider a home equity line of credit.  Set it up when you don’t need it. Then it will be there when you do.  Again, this should be a short-term solution for a cash crunch – not long-term debt. 
  • Third, do you have family or friends who you can genuinely rely on for emergencies? Just knowing someone can pitch in can ease your mind.  (Maddie and Isabel – if you are reading this, go back four paragraphs and read that one again.)

 

Please, please, please avoid using credit cards as your source of emergency spending.  It’s tempting to think, well, I’m sure I can pay them off “when I…” but the “when I” never seems to happen.  You can quickly find yourself caught in a cycle of high balances and high interest rates.

Having cash reserves gives you a feeling of quiet confidence. It’s comforting to know that you have budgeted for “non-budget” items, especially as you continue to save and invest for the big-picture things – a home, college, retirement etc.

The time to think about where you will get cash in an emergency is now – find those financial gas stations in advance, don’t start looking when you are on empty!

Do you remember the feeling of being on empty or no charge left in your phone?

 

How will you find those financial gas stations?

 

Can you commit to starting a savings plan?

Start Now.
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Contact Details

Rappaport Reiches Capital Management, LLC
5202 Old Orchard Road, Suite 160
Skokie, IL 60077
Phone 847.832.0030
Fax 847.832.0033
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