Badass vs Dumbass
Master your Financial Kung Fu to be one and not the other.
Go to Sifu’s Notebook for the 8 Tips to Build Your Emergency Fund
Primer: Who are Sifu & Ronin
Episode 2: Ronin Needs Big Pants
SIFU: Ronin, you’re here early today. Early eagle gets the snake, and all that bizniz. I’m all for it! This almost makes up for yesterday’s slow start. You ready, Padawan?
Ronin: Oh yeah, Sifu, 100%, well maybe 98%. I’ll hold back 2%, just in case. By the way, you sure about that saying about the eagle? Need to check my notes on that one, boss.
Sifu: Glad you’re paying attention, boy. Just playing, but Sifu’s creativity knows no bounds, am I right?
Ronin: Hahaha, yes sir, it works! Who wants a worm when you can have a snake? Go big or go home, Birdman! OK, I’m ready – let’s do this, sucka!
SIFU: Today the lesson is on the need and importance of an emergency fund. Lord knows, if there’s going to be an emergency, you and the numskull cohorts in your crew will be in the middle of it!
Ronin: Ha ha, you might be right there, bossman.
Sifu: Pffft, ok. An emergency fund is the foundation of financial stability. Without it, you are like a warrior without armor, like Iron Man without his suit, or Green Lantern without his ring, or Thor without his hammer. Or YOU, without your Linus blanket, vulnerable to the unexpected.
Ronin: Oh, like a rainy day fund. BTW, don’t diss the blanket. That baby blue one is my favorite!
Sifu: Tru dat. Life is unpredictable, Padawan. Emergencies can strike at any moment—medical expenses, car repairs, job loss, or a very frustrating dead refrigerator. An emergency fund is like a superhero protector against these unforeseen events.
Ronin: Sell it hard bossman: “Save money or face doom!” Ok ok, got it. So, how much are we talking here? A couple of fivers? An additional tenner.
Sifu: Really?! For heaven’s sake… Not even close child. Ideally, you should aim to save three to six months’ worth of living expenses. This ensures you have a buffer to cover your essentials without resorting to debt, which means not having to go to your favorite street corner loan shark. I don’t care if he’s your asshole cousin. He’s still an asshole.
Ronin: But, he’s my asshole. Wait wait, that doesn’t sound right. Nevermind. But three to six months? That’s a whole lotta bok choy and rice, Sifu. What if I just live on the edge and hope for the best? You know, my regular MO? Doesn’t “Hopes and Prayers” work?
Sifu: THAT … is the path of folly, Ronin. Hope and prayer is not a real strategy. In this case, hope is a 4 letter word, good only for dopes! Discipline and preparation are the keys to resilience, not hope. E-nope!
Ronin: Hahaha, gotcha boss. So, where do I stash this primo important emergency fund? Under my mattress? Buried in the backyard, along with the bodies?
Sifu: Your choices scare the bejesus out of me, #1. Your emergency fund should be kept in a liquid, easily accessible account. A high-yield savings account or a money market account are brilliant options. This ensures you can access the funds quickly when needed.
Ronin: Alright, gotcha. But what if I get tempted to dip into it for, you know, non-emergencies? Like a new pair of cool wide legged pants – that shit is back in bro! You in??
Sifu: Fuck no, dude. Focus! Self-control is crucial, Ronin. The emergency fund is for true emergencies only. To avoid temptation, you can set up automatic transfers to your savings account and treat it as untouchable. As in, keep your filthy paws off. You know, break ONLY in case of real Emergency, as the sign says.
Ronin: A-ha, the old “out of sight, out of mind” method. Always so clever, Sifu. But what if I don’t have much to save? I’m not exactly rolling in green here dude.
Sifu: What a surprise. Forget bigtime cheddar – just start small. Even saving a little each month can add up over time. The key is consistency. When spending, cut out the fat and you might have enough to put away each paycheck. Every extra dollar saved brings you closer to financial security.
Ronin: So, no more daily Starbucks deluxe lattes and impulse buys at the mall? You’re killing me dude.
Sifu: Yup, sacrifices must be made for the greater good. If that dumbass, Spock, understood the greater good – you can too. Financial discipline now will lead to peace of mind later. Consider it a form of training, strengthening your financial muscles.
Ronin: Hold up, Spock was a dumbass?
Sifu: Of course not. Just making sure you’re still with me.
Ronin: Ah! Good one. What’s the dealio with financial muscles? It’s hard enough pumping up my lats and guns bro! Now, what if I have debt? Shouldn’t I focus on paying that off first?
Sifu: Ah, great question. Maybe you’re not as much of a dumbass as I first believed. Just maybe though! Balancing debt repayment and building an emergency fund is critical. Start by saving a small emergency fund—perhaps $500 to $1,000—while making minimum debt payments. Once you have a basic safety net, you can focus more aggressively on paying off debt. In fact, at that point, you murder that debt.
Ronin: Finally get to kill something – I’m 100% in, master!
Sifu: It’s not a video game, #1! Remember, Ronin, an emergency fund is not just about money. It is about peace of mind. Knowing you have a safety net allows you to face life’s never-ending challenges with greater confidence.
Ronin: Peace of mind, huh? I feel peace when I get to sleep in! But seriously, Sifu, what if I never have an emergency? Won’t all that money just sit there, collect mold, doing nothing?
Sifu: That would not be unwelcome, Ronin! If you never need to touch your emergency fund, then congratulations. Winning! It means you are luckier than most. But the security it provides is invaluable. It is better to have it and not need it than to need it and not have it.
Ronin: Hee-hee, doesn’t luck favor the bold. I’m BOLD, dammit! I’ll start building my emergency fund. But if I end up with a mountain of cash and no emergencies, I’m coming for those baggie pants!
Sifu: No doubt, Pant Man. You and them big ass pants together is clearly your destiny. Remember, the strength of a master lies not just in his flying fists, but in his wisdom and preparation.
Ronin: Big Pants … Daddy’s coming for ya!
Sifu’s Notebook
The Importance of an Emergency Fund: Tips and Tricks for Building Your Financial Safety Net
Why an Emergency Fund is Essential
- Protection Against Financial Shocks: Acts as a financial cushion.
- Avoiding High-Interest Debt: Prevents reliance on credit cards and loans.
- Financial Independence and Flexibility: Provides freedom to make decisions.
- Preservation of Long-Term Investments: Keeps long-term savings intact.
How Much Should You Save?
- Save three to six months’ worth of living expenses.
- For volatile incomes, save up to a year’s worth of expenses.
8 Tips and Tricks for Building an Emergency Fund
- Start Small and Build Gradually: Begin with a modest goal, such as saving $500 or $1,000, and gradually increase your target to cover three to six months’ worth of living expenses. Starting small makes the process less overwhelming and allows you to build momentum as you see your savings grow over time. Remember, every little bit counts. As a bonus, you will start to feel a burden being lifted from your shoulders as your money worries start to dissipate.
- Automate Your Savings: Set up automatic transfers from your checking account to a separate savings account dedicated just for your emergency fund. Doing this will ensure that you consistently save money without having to think about it. You no longer need to fret about forgetting to do it – it’s done for you. Automating your savings helps you stay disciplined, reducing the temptation to skip a month or spend the money elsewhere.
- Cut Unnecessary Expenses: Review your budget to identify areas where you can reduce spending. This could include canceling unused costly subscriptions, eating out less frequently, or shopping more thoughtfully. Redirect the money you save from these cutbacks directly into your emergency fund. These small changes will add up significantly over time. Doing this alone will get you there much faster.
- Use Windfalls Wisely: When you receive unexpected money, such as a tax refund, bonus, or gift, resist the urge to go crazy and splurge. Instead, deposit it into your emergency fund ASAP. Windfalls can provide a substantial boost to your savings, helping you reach your goal faster without impacting your regular budget.
- Keep Your Emergency Fund Separate: Store your emergency savings in a separate account, preferably a high-yield savings account that is not easily accessible for everyday spending. Keeping your fund separate helps you avoid the temptation to dip into it for non-emergencies and allows your money to grow.
- Prioritize Your Emergency Fund: As a true financial building block, treat building your emergency fund as a top financial priority. Allocate a portion of your income to your fund before addressing other financial goals like investing or paying off low-interest debt. One step at a time. By making it a priority, you ensure that you’re prepared for unexpected expenses.
- Increase Contributions Over Time: As your income increases or you pay off debts, consider boosting your contributions to your emergency fund. Increasing your savings rate as your financial situation improves helps you maintain a fund that is proportionate to your needs and growing expenses.
- Avoid Using Your Emergency Fund for Non-Emergencies: Reserve your emergency fund strictly for genuine emergencies, such as medical bills, car repairs, or unexpected job loss. Avoid dipping into it for things like vacations, home improvements, or other discretionary spending. Non-essential spending at this point is verboten. Protecting your fund ensures it’s there when you truly need it.
Maintaining Your Emergency Fund
- Regularly review and adjust your savings target.
- Replenish the fund after using it.
- Continuously contribute to stay prepared.
