Audio Version: Let Me Hear It!
So far in our financial wardrobe series you have successfully established a solid base with your budget. While you may be feeling fab already, you’re not ready to leave the house just yet. Before you venture out for the day, you’ll want to be prepared for the what-if’s. What if you get a headache? What if your child gets a runny nose? What if you need an extra hat rack (or plant, or tape measure or floor lamp)? Okay, so, Mary Poppins might have overdone it, but she and her magic bag were on the right track in terms of preparing for the unexpected. Consider an emergency fund to be your financial handbag. You fill it up, just in case.
Redirect 20% of your paycheck to a savings account until you have stashed away enough cash to cover three to six months of expenses. Traditionally, the rule of thumb was to set aside enough to cover your essential expenses like mortgage, food and utilities. Instead, consider establishing a reserve to cover all of your living expenses, as the line between essential and discretionary can become blurry during a financial hardship (vino anyone?). Although interest rates on cash are currently low, the value it can bring in a crunch – compared to say, charging on a high interest credit card – may far exceed lost earnings.
Thus far, your #FashionSense is improving with a great base layer and emergency supply. But, no outfit would be complete without a killer pair of heels… Until next week!