Saturday, September 14, 2013

Baby Step 1: $1,000 in an Emergency Fund

Last Friday, we attended Financial Peace University home-study course at Redhill started by Kuya Jonathan, his wife Ate Nez and sponsored by their group of friends. I feel very lucky being part of the first class for a series of study highlighting the Dave Ramsey Baby Steps.

Dave Ramsey is an American financial author, radio host, television personality and motivational speaker. He formulated the Seven Baby Steps. Get out of debt the same way we learned to walk one step at a time.

Baby Step 1: $1,000 in an Emergency Fund

We all heard that we must save for a rainy day. It simply means that while we have money we must save for emergency fund.

The first step is establishing your initial emergency fund. Emergency fund is a fund used to cover any unplanned expenses (i.e. not budgeted). You can also call it God Only Knows fund. In this step, we are preparing ourselves to save in case of emergency.

Please note that if we can't save $1,000 quickly save what is more applicable for you. The initial fund is to avoid using debt in case unexpected events happen but to use your emergency cash instead.

Tip 1: Start saving as soon as you know it!
The bottomline is it really doesn't matter if it's $300, $500 or $1,00 just save an amount that you will feel comfortable. If the amount is too small, save more. If the amount is too big, save less.

Tip 2: Keep your emergency fund available when you need it.
Save your emergency fund in your savings account that can be access anywhere. In the Philippines, I choose BPI because I find it easy to make a fund transfer.

Putting up your initial emergency fund is a great way of changing our mindset about money. Start creating your budget and decide to save now. Think of an amount you can reasonably save each month and as time goes by double it. Focus on your goals and plan your action. All these requires effort, action and time.

My Top 5 Favorite Lines from Dave Ramsey
1. Savings must become a priority.
2. You must pay yourself first.
3. Unexpected events do occur - expect them!
4. Your emergency fund is not your investment; it is your insurance.
5. Discipline is a key ingredient.

This is the first time I attended group discussion that talks about financial management. It was a pleasure meeting them. Sharing financial experiences is the best part for me where in each of members share their own bad, sad and happy experiences dealing with money.

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