Tag Archives: #MoneyMondays

Save for the Unexpected

You’ve probably heard it before a million times. You need an emergency fund of 3 to 6 months. Maybe you brushed it off as not urgent or maybe even unimportant. And then the world came to a screeching halt in 2020.

Now here we are in 2022 and maybe you’ve fully adapted to the world post-COVID-19. So what are you doing to be ready to bounce back from the next global event? Did you use that stimulus to start your emergency fund?

It really isn’t a question on whether or not you need an emergency fund.

(You do.) It’s the first line of defense when unexpected expenses show up (and they will—have kids?). Unforeseen emergencies threaten to undo your hard work and careful financial planning.

But what exactly is an emergency fund? What should it look like? And how do you start building one if you don’t have a sack of cash lying around?

What’s an emergency fund… and why do you need one? 

An emergency fund is a dedicated amount of money to cover unplanned, unavoidable expenses. Establishing one is an important milestone on your journey to achieving financial independence! But why is it such a big deal?

Emergencies are a part of life. Nobody schedules a busted transmission or a broken arm, but you’ll need a way to pay for them when they happen. Who would have guessed that a global pandemic would force most of us to stay at home and cost millions of Americans their jobs? So it’s not a question of if you’ll need to cover something unexpected but how you’ll cover it. Without an emergency fund, you’ll be forced to either dip into your long-term savings (assuming you have them) or go into debt. For most people, either option can seriously throw off long-term financial plans. An emergency fund gives you the power to overcome sudden obstacles without sacrificing your retirement or piling up credit card bills.

Emergency fund ins and outs  One critical thing to grasp is that an emergency fund isn’t the same as your savings. Establishing a solid emergency fund is not a long-term goal that’s built over years or decades. Once the emergency fund is full, then you move on to other money milestones like conquering debt and saving for the future.

So how do you know you have enough in your fund? That depends on how much you make. A good rule of thumb is that an emergency fund should cover 3 to 6 months of income. That provides a buffer if you have an unexpected car repair, medical emergency, or if you’re temporarily unemployed due to an unprecedented global pandemic!

But what if you don’t have that much cash just lying around?  3 to 6 months of income might seem like a lot of money to set aside, especially if you’re currently living paycheck to paycheck. Building an emergency fund will take time and budgeting. Start with a goal of saving 2 weeks of pay. Then shoot for 1 month, then 2 months, etc., until you reach your goal.

The 2 Rules of Emergency Funds

Rule 1: An emergency fund is only, ONLY to be used in case of actual emergencies. It’s not for last minute getaways, much needed spa days, or killer video game sales. If those kinds of things come along, you can use a “fun fund”, which of course is part of your regular budget! (We’ll talk more about your “fun fund” in a later post.)

Rule 2: The emergency fund needs to be easily accessible. Make sure it’s in an account where you won’t incur fees for withdrawals when your car breaks down or you suddenly need a new AC unit. That’s why it’s there. Just remember to refill it as soon as the emergency has passed.

Once you’ve built your emergency fund and know the rules, you’re ready to move on to the next stages of building wealth.🎉Congratulations! You’re officially not broke and in the perfect position to chase your financial future!

If you’re ready to start your savings journey but not sure where to begin, check out these 7 Steps to Start Your Savings Journey from AmericaSaves.org.

Or if you prefer some help, meet with a financial advisor for a free consultation to figure it out. 

Save Automatically

Saving money on a consistent basis, regardless of the amount, is the true secret to financial victory. The strategy is simple. And thanks to technology, putting it into place can be simple also. So where do you start?

First you figure out what amount is workable FOR YOU, not anyone else. Then you take all the monthly cash flow that YOU can spare and start saving it into an account with the best interest rate, growth potential, tax advantages, and principal protection you can find AUTOMATICALLY, be it monthly, weekly or daily. Finding the best account is where a financial professional is key. Don’t go it alone.

These habits have created more millionaires than any other story, company buyout, or stock market windfall in the history of the world. The 8th wonder of the world—the power of compound interest—is the magic dust that will always work in your favor if you’ll put it to work.

Saving money is more about the decision than anything else. Just like breaking the cycle of foolish spending, you must DECIDE to save money on a consistent basis. When you do, over the years and decades, you will win because you’re employing the Time Value of Money and the Power of Compound Interest. This is the one-two combo that millionaires use to reach their status.

There are many culprits that can hamper your ability to build wealth.

Believe it or not, your checking account might be one of them.

A checking account is designed to give you quick, flexible access to your money—not grow it efficiently. That’s why the interest rate for an average checking account is negligible—less than .05%.¹ It might as well be zero if you’re considering it as a savings tool for the future.

But you may already be thinking, “no one would consider their checking account a savings vehicle.” Then why do Americans have so much of their money stashed in them—$2.2 trillion in 600 million checking accounts, to be precise. ²

The answer can only be that they don’t know how money works. Otherwise, they would have moved their cash to an account that leverages the power of compound interest with a higher interest rate long ago.

The sucker likes seeing a big balance in their checking account. The wealthy like seeing big deposits moved into their wealth building vehicles.

Do you have too much money sitting in your checking account?

As a rule of thumb, only keep enough cash in your checking account to cover everyday expenses like utility bills and groceries. Move what’s leftover into accounts and vehicles where it can accrue interest at a faster rate. And consider scheduling a conversation with a licensed and qualified financial professional to discuss which saving vehicles are best for you!


¹ “Average Bank Interest Rates in 2021: Checking, Savings, Money Market, and CD Rates,” Chris Moon, ValuePenguin, Dec 11, 2021, https://www.valuepenguin.com/banking/average-bank-interest-rates#

² “Checking Accounts Shrink by Nearly 100 Million Accounts Since 2011,” Tina Orem, Credit Union Times, May 8, 2018, https://www.cutimes.com/2018/05/08/checking-accounts-shrink-by-nearly-100-million-acc/#

Habits of the Wealthy – Part 3

The Wealthy prioritize Passive Income

It’s simple—the wealthy prioritize passive income because it saves time.

That’s because passive income streams don’t require constant time and effort to maintain. Once they’re up and running, they require minimal maintenance to keep earning.

Let’s consider a hypothetical example…

Sarah and Jim are coworkers and friends. Jim is content to work from 9 to 5, five days a week, in exchange for his paycheck. He trades about half of his waking hours for his income.

Sarah, however, is more ambitious. She wants a more effective way to create additional cash flow.

So, she starts a business selling crafts online. At first, it’s a lot of extra work—she creates the products, makes the listings, runs ad campaigns, and even ships the items herself. But she’s creative and motivated, and her business grows.

It doesn’t take long before she earns enough from her business to hire an employee to help with the marketing and shipping. She can focus on what she loves—making the crafts!

But that extra pair of hands increases her productivity even further. Now, she can hire another employee to actually make her crafts.

Suddenly, Sarah is almost totally uninvolved in her business beyond high level decision making. In addition to her day job, it’s become a source of income that requires minimum upkeep. And she still has time every evening for her family and opening up new passive income streams!

The takeaway? The sooner you can create viable sources of passive income, the better! It comes down to matching your effort to your reward. It’s a chance to create impressive returns over the long-term for an upfront investment of time, money, and energy.

If you’re interested in opportunities to create additional income streams, check out some of our past posts on the topic.

  • Side Hustle expansion

    Side Hustle expansion

  • Passive Income: How It Works

    Passive Income: How It Works

  • Start that side hustle like a pro!

    Start that side hustle like a pro!

For a one-on one discussion about potential ways for you to create passive income, contact us!

Habits of the Wealthy – Part 2

The Connection between Wealth and Reading

aisle at a library
Photo by Olga Lioncat on Pexels.com

Scenes like the one were common to me growing up. Somehow my parents made time to take me to the library regularly despite living in the remote parts of rural USA. I’m certain the intent was not to prompt me to be wealthy one day but just to nurture a love of reading. However, reading is a common denominator among the wealthy.

One study revealed that 85% of self-made millionaires read 2 or more books per month.¹ That’s not a coincidence. Many of us have been told that reading improves our vocabulary and grammar skills, but there’s so much more to it than that! Reading can help develop traits that can provide an excellent foundation for a prosperous life and building wealth. Here are three reasons why.

Photo by Olga Lioncat on Pexels.com

1.
Reading expands your perspective

Think of it like a hack that grants you access to the wisdom of others. Instead of only drawing from your own experiences and resources, reading is an opportunity to discover fresh and challenging ideas. And the more connections you make between the ideas you read about, the more creative—and valuable—you become. Now if every elementary teacher found a way to communicate that to every struggling reader in their class, think of the motivation and impact that could have on that child’s entire life.

2.
Reading can curb negative emotions

Reading is good for your brain—it can reduce stress levels and prevent age-related cognitive decline.² But it goes deeper than that. It turns out that making new connections is good for your mental health. There’s evidence that reading can help combat struggles like depression.³

Why? It’s because reading can help people process difficult situations. Reading about other characters and different perspectives can help forge new mindsets and beliefs. And the more you process through difficulties, the better equipped you become to build a prosperous life.

3.
Reading builds empathy

It’s no surprise that discovering other perspectives or exploring the inner lives of characters builds empathy.3 What might be surprising, however, are empathy’s benefits.

Not only does empathy lead to a richer emotional life, but it’s been shown to be critical for creating healthy—and productive—workplaces.⁴ Understanding the emotions and feelings of others makes you a more effective leader, coworker, and person.

Notice that none of these skills are directly financial—you won’t learn them in a finance or accounting course, and probably no one would pay you to read a book per month. But, as you can see, they can be critical for expanding your perspective and growing your career.

Photo by Designecologist on Pexels.com

Well if you made it to the end of this post, CONGRATULATIONS! 🎉 You’re already adopting a habit of the wealthy because you read this. Keep reading for 15 to 30 minutes per day for a week on a topic that interests or excites you. (Of course we here at ECV Talks would love to be that content that you’re reading. 🥰) Then slowly expand your reading time as you feel comfortable. At the end of the month, see how you feel! You might be surprised by how much your perspective has grown or shifted..

Sources:

¹ “5 Common Traits of A Self-Made Millionaire,” Caden Strause, Medium, Oct 26, 2020, https://medium.com/frugal-friday/5-common-traits-of-a-self-made-millionaire-f6cf65c13c6c

² “5 ways reading benefits your health — and how to make reading a daily habit,” Lia Tabackman, Insider, Dec 1, 2020, https://www.insider.com/benefits-of-reading

³ “The Health Benefits of Books You Have to Read to Believe,” Madison Yauger, Shape, Oct 27, 2020, https://www.shape.com/lifestyle/mind-and-body/benefits-of-reading-books

⁴ “New Research Shows Why Business Leaders Struggle With Workplace Empathy,” Bryan Robinson, Forbes, May 17, 2021, https://www.forbes.com/sites/bryanrobinson/2021/05/17/new-research-shows-why-business-leaders-struggle-with-workplace-empathy/?sh=749a6d8684ad

Habits of the Wealthy – Part 1 The Intro

So you want to be wealthy. You’re ambitious, you work hard, and you’re ready to discover what it takes to build wealth.
You’ve come to the right place.

Over the next few weeks, this blog will explore the habits of the wealthy. You’ll discover why the wealthy incorporate certain activities and rituals into their daily routine and how you can implement them, starting TODAY.

You might be surprised by what you learn. That’s because almost none of these habits have anything directly to do with how you spend your money.

But they have everything to do with building character and improving lifestyle. That’s because the wealthy are often ordinary people who reached a critical realization early on—financial success is just one element of a rich life. The more growth you experience as an individual, the more empowered you can become to build wealth.

There are plenty of exceptions—you’ll find countless people who are both prosperous and non virtuous. This series isn’t about them, and it’s certainly not for those who want to pursue that path.

But if you’re curious to discover the habits of the wealthy, keep your eyes on this blog. You may learn something you can put into practice right now that might transform your future!