Basics of Financial Independence: Emergency Fund

1. Set aside 6-12 months of expenses in a savings account as a rainy day fund.

• The very first thing one should do on the road to financial independence is set aside an emergency fund. And the first step in this process is finding out your average monthly expenses. This can be accomplished the easy way by using an expense tracker such as Personal Capital or by manually adding them (housing, utilities, food, etc) up using pencil and paper. Either way, this step shouldn't prove that difficult.

• The next step would be to find a savings account that offers you some return on your money since the best case scenario is that this money will never be used. Deposit Accounts is a useful website that can assist you in finding a high interest bearing personal savings account that suits your needs. Personally, I am biased towards credit unions such as Alliant Credit Union but you are free to find one that best suits your individual needs.

• So is it 6 or 12 months of expenses? Personally, I recommend having 12 months of expenses set aside just because of the peace of mind it buys. For example, with only 6 months of expenses saved the average person will start panicking after 4 months of being unemployed. This can lead to rash decisions being made. One way to have the best of both worlds is to first set aside 6 months of expenses, complete the remaining 4 steps towards financial freedom, then circle back and increase the emergency fund to 12 months of expenses.

Poetry for the current times...

Buying Happiness
by Dean

All I ask is for the chance to prove,
That happiness, money can’t buy.
Just ask Warren Buffet or Bill Gates,
Or any other filthy rich guy.

They found it out on their own,
From being filthy rich.
They didn’t learn it from TV or books
Or hear it from some broke-a$$ b????.

I want to know what it's like,
To be filthy rich like those boys.
I want to have the big bank account,
And be on TV showing off my toys.

I too would write letters,
To blogs, magazines, and printed news.
About how tax cuts favor the rich,
And how the poor man, the government screws.

What about a tax cut,
For the average guy on the street.
Who works 60 hours a week,
But still can’t make ends meet.

I too would spend my time,
Setting up offshore corporations.
And take money from hard working Americans,
And send it to developing world nations.

I will quote famous scriptures,
And catchy little phrases.
All in an attempt to make the government understand,
That the poorer American needs tax cuts and pay raises.

But now I shall go back to work,
And stop my a$$ from dreaming.
Cause nobody will read my article,
Or listen to my screaming.

I’ll just keep complaining
About my life with lack of money
When I should be at home,
Reading the SCRIPT to my honey.

Hell yeah, money do me something!

That was the retort I gave my Sister when she inquired, "Money do you something?" with her smart self. I mean, she has known me before I knew myself. How could she not know all that money has done to me?

Look, me and money have serious issues. Some things were said and some things were done between us that I would rather not revisit right now if you know what I mean. Some of these things go so far back that at times I feel like money must have done me something in a past life, when I was in the womb, when I was a baby, a toddler, an adolescent, a pre-teen, a teenager, a young adult, yesterday, and today.

I don't know about you but my issues with money reminds me of when I was a kid and we would play the last-lick game. It seems like no matter how many licks I give money he finds a way to give me the last-lick. So I am constantly trying to give him as much licks as possible, 24/7/365.

Everytime I deposit a check, get paid, make a gain on a stock, or collect dividends it is my way of getting back at money. For example any deposits of over $1000 I equivocate to me giving money a kick in the shin. Sounds violent? Hell, in about two weeks when I do my taxes you should see the elbow to the jaw money will give me, OUCH!!

Why do you think I am studying Finance today? Full time now (my Mom uses that phrase) I join the winning team. :)