December 24, 2020
Those of you who joined my free Financial Solutions for You webinar last month got a jump on an important new piece of advice.
I want you to reconsider how much you are aiming to set aside in your emergency savings fund. I have long said the goal should be 8 months. My new advice is that you want to have savings that can cover 12 months of your living costs.
Yes, 12 months. I know that is a ton.
Don’t panic. Don’t feel defeated reading that. Especially if you are just starting out and have a one-month reserve right now. That one month reserve is fantastic. Especially if a few months ago you had nothing set aside in savings.
The 12 months is a goal. And like all goals, it takes time to reach your end point.
Every month you save a little more is a huge step forward. Every time you decide to not buy a want so you have more to deposit in your savings account is a win. Many of you know that a few years ago KT and I walked the Camino in Spain. An amazing experience. And you know how we did it: One. Step. At. A. Time.
So why am I asking you to make 12 months your goal? Well, as I write this, we are in month 10 of the economic fallout of the coronavirus. The news that we will soon have effective vaccines is fantastic. But please understand it will take many months for vaccines to be available and distributed so that enough of us can get vaccinated. I think it will be at least a year, and likely longer, before the economy (jobs!) recover strongly.
You know I always say hope is not a financial plan. We can all hope that we will never face another pandemic or any extended shock to our personal lives. But along with that hope we need to plan for things not going as we would like.
That’s why my advice is to work toward an emergency fund that could cover your essential living costs for one year.