For as long as I can remember, personal-finance writers, teachers, and counselors have recommended we prepare for times of financial difficulty, especially periods of unemployment, by setting aside emergency savings equivalent to at least three months of take-home pay. (This is a minimum and it is highly suggested that the fund be much larger, able to cover expenses for 9-12 months.) Through the years I also have given this same advise to my students and wokshop participants.
Never did I think that I would ever really need to use my emergency savings for an actual emergency. That is, not until a month ago when the last paycheck was deposited into our account. It was then that the reality of my job loss really sunk in: ”I was unemployed with no immediate prospects!”
It was time to put those Financial First Aid skills to work. The first thing was to examine current expenses and create a “bare-bones budget” based on the assumption that I might be unemployed for quite some time. Comparing the new budget with our emergency savings revealed that we can continue to meet essential expenses (and still have a little fun) for nine months. We are fortunate. And, hopefully, we won’t have to use up all of our savings.
Some may say that they can not save, especially during these economically-distressed times. My personal experiences and professional observations are that everyone can and should save something. It may not be the recommended 3-12 months of take-home pay, but it can be something. And as I always say, ”something is always better than nothing.” Additionally, the savings don’t have to all be in the form of money. For example, maintaining a well-stocked food pantry may, in some instances, prove to be more valuable than money in the bank.
Regardless of your financial situation, please join me in practicing the habit of saving a portion of everything we receive. Those who like or need a tangible committment may want to complete the Saver’s Pledge (suggestion: print on light-green paper).