@@osmosisjones4912 but wouldn't you also be able to save more? And also, saving is actually not the best way to grow wealth. If your looking to secure your financial future, you need to do more than save, you need to invest, pay down debt, creative more passive income etc. If you want another RU-vid channel that offers interesting advise on these topics, try minority mindset :)
@@Poorstargazer23 what Examples do have infation being good thing at least theory show computer simulations World of war craft or the game Monopoly? how come proverty increase's often when the Democrates are power of course Ragan tour down the housing projects . But how come black second poorest race yet the most welfare. The number poorest are native Americans. Except the Tribes who don't get Reproductions. no fault Divorces cause mass homeslessnes Men was Feminism. But issue inflation. Many Woodrow Wilson's polices on free market next thing ya know the great depression . Also Venozela Cuba North Korea. What Examples do you have inflation being for the country. Even in any simulations. The only people benofit from inflation are Democratic politians Because everyone is poor new.
@@carlosgmelendez I would say always! Even the poorest among us sometimes purchase things or services they can forego altogether: a trip to a fast food joint, name-brand instead of generic items, a traffic ticket or taxi fare because we're running late, interest/overdraft/late charges of any kind, cigarettes/alcohol/overpriced coffee, etc.
That is partly because of this ridiculous court system. Any financial decision comes with risk. The best decision does NOT give you the best return all the time, but rather does the best to ensure that your bottom line is not affected. If school teaches tips of financial literacy and investment, some idiots will certainly sue the school for whatever BS they get themselves into
I grew up with financially minded parents. they pounded the 10% savings for a rainy day at me. I listened to them , at 72 yrs I don’t live on my credit card. Own my house, savings 2 years worth. I learned that being frugal is a good start.
Two years ago, i had no credit (no debts either, but...), and needed two emergency root canals. Insurance didnt cover it. It came out to a grand total just north of $6,000 that I didn't have. I had just finished paying for school and graduated. I decided then and there that I needed to get that my shit together. I borrowed the money from a family member, paid them back, and began an emergency fund. Now I have about 14k in an emergency fund, I've built up my checking account, I have money in the stock market and have a decent credit score of about 745 (I took out a credit card to start building credit pretty much immediately). It took work and lots of hunkering down and saving, but it was worth it. I got so used to it that I've got a few thousand set aside for a new (well, used) car and I'm hoping to have enough to buy a better car in cash come March to avoid paying interest. Definitely feels like I have more breathing room.
Put it into the s and p 500 because your money will lose value over time just sitting around and you will be making money from now on from your emergency funds so it will grow with time and you will put no work in
I could also lose it in the stock market, I could lose more of it in penalties should I pull it out early to cover an emergency or job loss. Also, my income is high, so if 50k slowly rots away but gives me insane piece of mind, I’m cool with that. Not everything is about profits, sometimes it’s about comfort.
@@Jimmy-ph8xn the s and p 500 is very safe long term just having a bigger emergency fund is better in general because if you have multiple emergency at once you could pay them off. 50,000 is still a lot don’t get me wrong but I would consider spending 50percemt on the s and p 500 l. But again not my money not my choice
That might be a sign that getting creative for additional income is your next step. Second jobs are a great boost to help you start saving (I've had 3 and even 4 jobs when I was trying to pay off debt and save)! -- Philip
Haha, looking at the comments it's easy to see how normalized a second job is just to make ends meet 😂😭 I mean, you have to do what you have to do, but it doesn't make it any less messed up.
@@Poorstargazer23 If you have a part time job working 25 hours per week it's not "messed up" to get a second job. I think plenty of people are in this situation. Honestly we have it REALLY good in the U.S. compared to half the world. I really think that if people could travel to a few countries they would count their blessings. Running water and electricity are not a universal right. 16% of the world's population have little or no access to electricity.
had only $1000 into emergency funds while i had 12k in funds my dog got sick and i needed $400 went to my emergency after never using it and now i’m going to focus on building it up higher than just 1k. my goal is 5k🙏
People always tell me that your savings account should be your emergency fund but I always felt that was wrong and that it should be separate glad to know I was right!
It can be the same account if you know your expenses and how to properly manage them. It's about knowing what's going out each month and what you'd need for a rainy day
No, it really should be your savings account. At least for me, I can pull money from it into my chequing account on the same day for emergencies. If you are saving up for upcoming expected purchases, then you can leave it in your chequing account if you are undisciplined. And if you are saving up long term, then that money should be in proper investment accounts, not a standard bank savings account.
When I was younger I used to covet only stuff like video games but around my late 20s I started coveting peace of mind after seeing some fellow friends go through rough times. The emergency fund (6 months worth of expenses) was my first major personal financial success. It helped years later to weather being laid off and a nice supplement to Employment Insurance.
I used my emergency fund to keep my cat alive. One of my cats (they came with the girlfriend, but I have grown close to them) was sick. He was peeing blood. The girlfriend said 'this might kill him', and I said 'we are going to the vet, now'. He needed surgery. So, the surgery+inital doctor visit = about 2000. I put it on the credit card, but paid the credit card off immediately. Got to get that cash back. And now, Einstein (the cat's name) is still alive, and wanting all of the pets.
The problem is the average American thinks having a $500/mo car payment, eating out four times a week, digging out of a $30k-100k hole after college, $30k weddings and a lifestyle funded on credit cards are just part of the deal.
Idk if you still read comments from old videos but this video inspired me to start an emergency fund. I broke my spine in an accident right before finding out I was pregnant late last year. I've been in and out of work since with various complications but my emergency fund means that I have not had to stress about money at all during this time.
The only time I've had to use an emergency fund was when my grandmother passed away. I pulled the 400 bucks out and flew home the next morning. Emergency funds are the best
It sounds like a legitimately good idea so long as the credit card balance was paid off immediately. I would otherwise reserve using a credit card for gas and a rental vehicle.
DjArmedWolf this is what I do! Anything that I can put on the credit card I will for the points! I always pay off the balance in full so it’s really just free $ that I apply to every payment at the end of the month
Hey bro instead paying off instantly invest the money in market and before due date pay money back. In this way you will earn points as well as some return on your money
Between you guys, Dave Ramsey, and Chris Hogan, there’s no way to be financially blind anymore! That said, once this check gets cashed, I’m debt free & starting saving and investing to be financially independent and wealthy! Thanks for all that you do!
I stopped working on just paying off debt. Now I'm paying off some debt every other month and saving more money each month. This way I am Putting away money and getting out of debt.
I do the same. Just paid off my car 2 years early on the loan back in September and still kept 3 months of expenses in my bank. Now I'm working on getting back up to 6 months of expenses and paying off my house at the same time
Pay off your debt. You are building an emergency fund so that you won't have to get into debt or worry about getting into debt but you're already in debt. Don't prepare for a problem you're already in ; fix your problem and then prepare for a next time.
@@guy_5108 the only problem with that is what if you pay off debt and drain your bank account then immediately lose your job afterwards? you are screwed, you can't pay bills you can't buy groceries, you can't do anything. debt can be managed or in some cases delayed during unemployment. an empty bank account can't be
ano070602 I have a similar mindset recently. I want to pay more than minimum on my student loans, but I realized I need more savings to truly feel like I’m in control financially, not just spend a bunch of money on debt that will take years to pay off anyway.
@@drunclecookie216 I agree. I was in a similar situation when I had to move cross country and it took everything we had to move. We had no choice we had to move. Now we are slowly climbing out of debt but setting aside funds for just in case.
The whole concept of an emergency fund is not about its utility in a crisis. The "emergency fund" construct is about teaching delayed gratification. Anyone who can build an emergency fund is also someone who never needs it. Building one is about developing the discipline to navigate finances properly.
No, it’s very much about its utility in a crisis. That’s why it needs to be kept somewhere that it can be liquidated in an emergency. If a rich person has all their money in long term bonds, then they can still get fucked by not having an emergency fund that they can liquidate for an emergency. The discipline you talk about is just a nice side benefit.
@@CharleeWayne yeah with all the Fed rate cuts taking place in the US, you'd be lucky to find anything higher than 2.1%. I'm jealous of that rate you getting.
I fell in the shower and broke my big toe 3 years ago in December. I had to take medical leave for a month and my salary was basically halved. This was at the WORST time possible; what with Christmas and family get-togethers. My savings got me through the month, through the holidays and to my first paycheck after I got back from work. So yeah, save, save,save; because u never when life will knock the croc out from under you.
lol the last three years of my life have been one of those "sprints" you speak of. It feels great to know that if contracting work dries up, I have income to fall back on
I deny the statement. Credit card is a doom unless you are a disciplined person. Use the credit card as cash. This is how i use credit card. Suppose i purchase goods worth $100. I have the cash to pay but i use CC and invest the money in stocks for the credit limit period. So when the due date is near i withdraw the money from market and pay credit card. So here i made money using CC. To me this is tricking the system.
@@animenomad4186 You are forgetting ine thing. Risk! If your investments fail then you are on the hook for the CC payment. Also, most people are not doscilined to the point where they will pay off debt if they were that disciplined, this video or this conversation would not have happenned.
@@animenomad4186 You missed the point. You use your card responsibly, spending what you have. The video says that if you suddenly need $3k that you don't have and use your credit card to get those $3k now, you're screwing yourself over. The "heavy" interests in the credit card you've just used as "life preserver" will drag you down into debt.
@@shanelawrence7438 If the stock market crashes 10%, that doesn't mean everything crashes 10%. Some stocks are recession proof and may not budge, lose only a point or actually go up. It's good to have a diverse portfolio so you can choose what you want to sell if you need emergency cash. Plus that 3k credit bill from the water heater... if you and your spouse can't pay that off when the bill is due in 30-45 days from your combined paychecks, you have other problems.
Emergency Fund requires to be INTENTIONAL, focused and to LIVE BELOW YOUR MEANS. Tip 1 : Pick a SPECIFIC NUMBER. Tip 2 : Get ORGANIZED ( for real emergency only) Tip 3 : SPRINT ( cut on expense and do work for extra money)
Relevant data suggests: You need to calculate your monthly expenses, then add 20%. Multiply this by three, and that's what you should have at all times in cash or in a bank account
A not as popular way to get an emergency fund is to prepay all your monthly bills for several months and get ahead of the game. So have your mortgage/rent paid for the next three months in advance along with your utilities. Pay all your bills immediately when they come in also buying you time in an emergency. Of course you have no CC debt which gives you a 45 day interest free loan when you make a charge now moving you up to 4 months...I've been doing this for decades and when cash flow is slow this is a free ride until things are back to normal.
Kia ora (greetings) from way way down in New Zealand/Aotearoa. All your videos make cents! Sorry hope I win the worst pun award, haha. On a more serious note I am amazed and shocked how many people up in the US and down in NZ take out a loan to buy a car. I have always bought used cars cars and they have been reliable overall. Thanks again for your awesome video's from an admiring Kiwi. Ps, I have an emergency fund. Cheers, Richard
Building up an emergency fund is hard and not easy. - One thing you can do is: - If you receive direct deposit from your employer, ask your employer if you can split your paycheck into 2 different bank accounts. - If the answer is yes, open a second bank account (Preferably at a different bank you don't use). - Ask if you can put say, $20 into this second account every paycheck. - If being paid bi-weekly, that should equal to about $40 month (If you can do more great, if not no big deal). - Check-in on it once a quarter. After 1 year, see how much you have.
People like me who work a normal job, use 1/3 of salary for only essential. The rest goes to savings since i dont know what i want to buy,just feel like i have everything i need. the fund now can last me 2.5 to 3 years now if i suddenly go jobless. i just started working 3 years ago. the best control of spending is you dont need to control at the first place. SImply dont buy stuff to get a dopamine surge
I make over the median near a major city and I can barely save half with how expensive housing is around here sharing 1 bedroom apartment with my wife. I can't imagine how people even afford to live making minimum wage given the housing expenses.
@@berksarioz969 I suppose u are on track, understandably, spending is depending on locations and income range, as long as everyone here is doing thr best they can to save is already a step forward. I'm from a 3rd world country, arguably my savings although takes up high percentage, my purchase power is relatively low, where if u save even smaller percentage, u have higher purchase power. As I progress through career I suppose I can save even more aggressive, an 1k dollar raise, is 1k dollar directly to the bank, raising 0 extra expenses. PS: I still earn below median income despite working as professional engineer.
Try investing some of it into stocks / etf / p2p / crypto. Not alot, small steps. Thats what i do. Emergency fund always backing me up for bad situations so i dont have to sell my stocks or stuff.
Since my emergency fund has finally grown large enough I've been raising some of my insurance deductibles. The way I see it in an emergency I can now afford to cover those higher deductibles. I figure, why pay extra to the insurance company for a lower deductible when I can pay them less and easily cover a larger deductible.
@@Oncopoda Not surprised. They're going to get you one way or another. When I reduced the coverage on one of my vehicles, my rate went up to exactly where it was before. When I added the coverage back, the rate stayed the same. If I'm going to pay for it (and I am), I might as well have it.
See this is what I love about Two Cents you guys make finacial health and education so real and tangible instead of hoping a random textbook anecdote would suffice
I remember the days with my ex wife where we had no emergency fund or savings of any kind. We had a house of cards where the slightest sneeze could and finally did topple it over. Many nights were sleepless because of worrying about money. We lost the house. I was on the brink of bankruptcy and my ex wife left because I refused to keep working 2 full time jobs trying to support her and she told me life will be better without me. Fast forward 8 years. We divorced and I met and married a wonderful woman. I paid off all the debt I had. I bought another house and paid it off in 6 years. I am completely debt free now with a good emergency fund while my ex wife has since filed for bankruptcy since. Moral of the story is make a new budget every month. Allocate every dollar you have coming in to something. Live under your means. Avoid ALL debt and have an emergency fund. Most of the time if we have an unplanned expense we can cash flow it and not touch the emergency fund.
@@Vibrantly_Monochromatic definitely. My wife and I may not always agree on everything but we make sure that we work together and we’re in agreement when it comes to money.
An important issue is what exactly constitutes an emergency. Different people have different definitions at different times and/or circumstances. One person's emergency may be another's mild inconvenience. And sometimes you don't even know what emergencies you could possibly be in. That's why I don't have "emergency fund" per se. I only have cash, which I draw from and replenish regularly. If I'm low on that cash, THAT'S an "emergency," and I'll try to replenish it asap. I have about $15k of such cash. That's also the amount usually recommended, about 6-12 months of expense. I use it to pay everything that I need cash for, not just in emergencies per se. But as I said I also replenish it regularly.
I had those, too. Man, you can go from super hero to straight Disney evil if you ever tell your 'friends' no. I was one of those friends who was never broke for the wrong reasons.
Started my first job a few months ago. I'm a senior in high school so when I first started thinking about my finances I knew I had to have an emergency fund unfortunately it seems like there's not a lot of financial advice or help for teenagers on the internet which is a shame because it's important to start these habits young. What I did was I decided that I was going to put 10% of my monthly paycheck into an emergency fund every month equating to about $75 each month in the fund. I have $225 in my emergency fund and going to put another $75 in it this month.
It doesnt have to be specifically for teens. You can use the advice given to adults and apply it to your situation. Its easier for teens to save anyway because yo uusualy do not have to pay any bills! But they just usually dont save... instead they spend their money on video games, food, makeup and Jordans (i dont understand this obsession with basektball sneakers at all). Just make sure you always have a savings of some kind. That is really importat.
That’s great advice. But….. Where I live, what I’m seeing and have experienced is that most employers today won’t pay you enough to live they only want to pay you enough to survive. As long as they pay you enough to make your necessity payments and have enough money for gas to get to work each day then that’s all they’re going to pay you. So how do you save when you only have money to survive on? You may say, “ find another job.” Good luck. That’s the problem most companies are like that today.
My wife and I have needed an emergency fund twice in our life together, and only had it once: 1) right before our wedding when my rental property went empty for four months, and needed about four grand in repairs, and my wife's car had expensive repairs, and we had a wedding to pay for 2) just recently had the rental property go empty for a couple of months, 3 grand of repairs there, and about 3 grand between my car and tree removal at our primary residence. The first time, we didn't have an emergency fund, and the second time we did. It's still a headache refilling the fund and cutting back for a little while, but the first time around we ran up a credit card bill that took us over a year to pay off completely, which was a nightmare. Refilling a fund feels completely different than feeling like your falling behind. That's our real life "why"
Their was a system in place in Belgium: You could buy a house and have a morgage. Where the intrest you payed (now because of low intrest) was about 20 000 or 40 000 euro's on the loan. But because of that 'system' you could put that in tax reduction. That tax reduction would save you €20 000 to €40 000 on taxes over 25y (25y is the most used lenght of the loan). Meaning: you just could get a loan for a house intrest free. To bad, the gov axed this system in 2019 with only 3 month of notice. Meaning buying a house in 2020 and beyond didnt get you any tax reduction. Their was a real real rush on the real estate.
I lost my kids in a house fire at there moms it was really hard to deal with there lost and not have life insurance on kids is very expensive I had no money saved up besides 132oz of sliver I sold it to get the ball rolling I had to cremate and FYI life insurance for kids under 10 is free I did not know that then but every one should plan for everything and an emergency fund would of helped me form going through Financial ruin I am about 30,000$ in debt from borrowing from multiple sources and not have enough money to pay a lot of that back I’m focusing on one loan right now which is about 15 grand the other two are in collection and eventually I’ll pay them off but my credit score is bad and I am flat broke with bad credit and worse of it all i don’t have my family
After try all the efforts to financial freedom. From October 2019 i am trying to manage my cash flow by cash envelope method. I can clearly see the difference in my money management. So now I save some amount from my salary as saving which will be emergency fund or any short of savings. ( as we receive 4% interest per annum). If you can please do a video about cash envelope system, it may help many people to start financial freedom. Best regards from Colombo, Sri Lanka
4:25 I don’t need to pay for medical bills! I have the NHS!!! The most my parents have probably paid is like £20 for an eye test and I don’t pay anything cause I’m a child
Even in a country with good health insurance you can have medical bills you have to pay. I live in a country that is ranked higher than the UK when talking about best healthcare. I still have medical expenses every month. I need medication and my body doesn't react well to the cheap variant, so I pay. Still not a lot, but it happens.
I personally live on half of my paycheque and everything goes into savings. I recommend this to everyone because you become truly free and can sleep well at night. Nothing can stress me right now - not even losing my job.
Brother do not keep the money in bank as you will loose money to inflation rather invest it in a mutual fund or if you have knowledge then directly in stocks
@@animenomad4186 I understand that, but not having physical money next to me that I can react and be the first to invest if opportunity arises is currently more valuable to me. I do not understand investing in index funds in my country (EU, Germany) - when can I sell my funds? how much do I need to pay to goverment? how often can I withdraw? etc... to be comfortable investing in stock market.
@@noctreik umm you are right you should not invest all your money if you are a newbie to stocks and opportunity cost is right but instead of a fantasized big opportunity in future atleast slowly invest half of your money in stocks. That way you will gain knowledge and also way higher return compared to savings. Now i do not know how investing works in Germany as i am Indian. I would suggest you know about your stock exchange and the stock brokers and their brokerage. Trust me i was also like you, i feared the market a lot and thought of mutual funds as scams when i was younger but now i rejoice that i pushed myself for my bright future. Man mark my words 10 years from now you will cherish that you decided to move towards the market. Now is the best time to take charge of your life for greatness and understand times like these are best for investing as you get good stocks at low price. You are in the first step of financial freedom where you save rather than spend. Brother i said all of these as i feel you want to achieve something great in life and want to be fully prepared when time comes.
With what's happening around the world right now, this should be a must to every individual/family. At least a year worth of financial emergency fund. Governments/businesses needs to have this type of fund as well.
Oh how timely this video was. Thanks to my emergency fund I am DEFINITELY less stressed due to the Corona Virus economy. Once those stimulus s checks come in they are going straight into that fund.
Hola amigos !!! Aquí en España los abuelos y padres de los babyboomers ( nacidos en los 60 y 70 ) eran muy frugales y con lo poco que ganaban ,ya que fue la generacion de la guerra y la postguerra , la mayoría ahorraron para tener su propia casa ,algunos hasta dos ademas les dieron estudios a sus hijos , iban de vacaciones si podían al pueblo y no tenían deudas. La generación milenial alquilan en cuanto tienen el primer trabajo , compran coche , fiestas y vacaciones...y quieren pisos nuevos ..compran ropa on line, comida on line , conciertos , Netflix, gimnasio etcccc claro en una emergencia , imaginaros 😨!! Un abrazo para todo el equipo desde Madrid 💕💕💕💕
Having an emergency fund doesnt mean its cash under your pillow that doesnt grow. It means to have it where it is easily accessible too. I would suggest 1 month of cash at home, 2 months of cash in bank and 3 months of cash in something flexible like a bank fixed deposit, insurance investment schemes, index funds, these take around a week or 2 to process and take out but the money at home and bank should tide you though at least 2 months, which is more than enough time for the money to come back to you. And having to do the process of withdrawling would help make one think. "Would I really need it?" Most people cant save up an emergency fund cause its too easily accesible, " I can save up again later, i could use the money to buy this first!" is what cause many people to fail.
I can't afford an emergency fund but my IRA. That is all I got ability for. Question...how does one in poverty or edge of poverty afford everything and have savings? Some even with two or more jobs.
Asking for a friend? There are a lot of ways to make ends meet, but some are unpleasant. Get rid of your vehicle and use public transportation. Live in a house with multiple people and split the rent. Does your phone cost less than $100? Does your phone plan cost less than $40/month?
Jennifer Isaacs Try cutting back on expenses, getting a raise or switching to an employer that will pay you more, and saving as much as you can for an investment like starting a business.
@@Iffy50 I can't get everywhere I need to go without my vehicle and the cost of gas and most maintenance equals what the bus would cost me in a month. I have to take my kid to the hospital on visits so buses don't go where I need the times I need.
@@Chamelionroses Let me make this very clear. There are many people who say that they can't make ends meet and when I actually examine what they are doing the problem is self-created. You are NOT one of these people. You clearly need help from family, friends, or social programs. There are a lot of options out there and they are made exactly for people like you. Unfortunately I don't know how these things work, so I can't really advise. I hope that you are able to get help!
Will you do another video on what to do now after blowing thru all savings and racking up debt due to this terrible year? Any advice on the best way to transition to homelessness?
Wow , I just realized I do have an emergency fund but need to feed it more. I have a habit of withdrawing $50 from each check to put in a nest egg I keep in a safe. This keeps the money safe from....ME. Since I have a stress spending habit that I am doing my best to curb with professional guidance, haha. What I like about the physical nest egg is that once I add the money, I completely forget about it till my next check. my goal with each egg is 1k then on to the next! 😁 Great video !
Dave Ramsey is one of the greatest financial advisors ever. His first baby step on the way to "living like no one else" is saving a $1000 emergency fund. This may arguably be the single most important step to becoming financially fit, since building that emergency fund is essentially dedicating your commitment to building wealth. It's a true safeguard to keep Murphy away from your house.
I wouldn't give him that much credit. He explains to adults how they shouldn't live beyond their means, which is something that should be common sense. He also doesn't believe in credit cards, which if you're smart enough to pay off every month, is literally free money/points you're getting to spend what you're already spending
@@Jake-pi3yh I mean yes, there are some advantages to credit cards compared to debit cards, but the sad reality is the fact that people try to spend the money they don't actually have. There's a reason why our country is in trillions of debt. Dave Ramsey is well known for his method (the debt snowball) to get out of debt. But if you could go your entire life with no debt at all, that's something to be proud of.
i've saved up a nice little buffer in our general savings in prep for us moving out of state next year. I think i will have enough for us not to worry about the move and have enough to transfer to our IRA account before tax deadlines. It's a general savings though, and next year i want to get a little smarter and have one just for life emergencies and one for fun stuff (vacations and toys). Probably won't have much to start with but starting small is still a start!
40% of Americans cant afford a surprise $400 expense and so the fact that if you dont have 3 months of expenses saved up your life could be ruined in a disaster is sad.
I don't know about other countries, but if you're in the US, the easiest card to get is a gas card from one of the big oil companies. It's hard to overspend on gas; a car can only hold so much, and you can't be tempted to buy crap you don't need, since it isn't good anywhere except at the pump.
chocolatechick729 I keep mine in my savings account that’s linked to my checking account (it’s at the same bank). It’s separate so I’m not tempted to spend it, but it’s easy to move money over if I need it. I have also thought about putting it in a separate bank, but it takes to long for me to move it. I hope that helps!
And +1 to a high yield savings account! The interest rate you get at a local bank is usually going to be pretty low; if you're not doing this already, consider putting your savings in an online savings account, as they can have much higher interest rates. NerdWallet maintains a list of the best savings accounts; just Google to find it. But be aware that Cade above is right; to transfer funds from bank to bank can take a couple business days, so you need to plan accordingly.
In a high yield savings account! I have my checking account and savings account separately with 2 different banks so i won’t get tempted to touch it or try to transfer money from my savings
Just to clarify, what should come first? Paying off debt or saving for an emergency fund? There’s another financial guy out there that says get to $1,000 in emergency fund and then tackle the credit card and other high-interest debt, then come back and increase that emergency fund to 3-6 months.
Emergency funds are for emergencies! Don't go use emergency funds to buy a car. Start seperate "car" fund for that car purchase AFTER your emergency fund is fully funded (3-6 months)
In the US, we pay every month into an insurance with terms where every year you have to renew it and whatever you paid last year does not roll over for the next year. You can go years not needing insurance but when you do, none of the money you paid in all the previous years goes towards your treatment. In fact, you have to make a "deductible" where you have to pay 2k to 5k$ out of pocket before you get the insurance to pitch in. (This 2 to 5k$ renews every year too so if you were 1 dollar away from hitting the deductible in Dec 31st, by Jan 1st you have to start from 0 again. That deductible depends on the plan; the cheaper the monthly payment, the higher the deductible. Also, insurance companies try to find ways to not cover treatment in order to maximize profit. Not only are people in the US being ripped off by insurance companies, but from hospitals and clinics as well with no price transparency and rarely you can know how much an operation will cost in advance until it goes through billing. In emergencies, rarely do you even have the luxury of even stopping to think which hospital will be cheaper because your appendix will explode any minute. Also the drugs we get are many times more expensive than in other countries. What I've explained is just the tip of the iceberg. It's a scam within a scam.
Thanks so much guys, as someone who has never focused on being financially competent nor had good peer role models around me to learn from, your video series has given me the self esteem I needed and now I have saved up almost $10,000! Before this I used to spend on my paychecks on frivolous things like restaurants and electronics. I can't tell you how much better I fall asleep at night knowing I have many months worth of rent in the bank. Before, losing a job got me evicted and put me into a homeless shelter. I will never return to that life again!
I would expand on what was said in the video about having emergency funds in a separate account. I have short-term emergency savings in one account for typical auto repairs, household repairs, and so forth. Maybe 1 month of expenses worth in that account. Then, I have a higher interest money market that's intended for longer-term emergencies -- unemployment, medical emergency, etc. It's about 3x monthly expenses. Then, finally, I have an index fund as the final, less liquid, emergency fund, in case things go badly and the other 2 accounts are depleted. It's the balance of emergency savings, maybe another 3-5x monthly expenses. I think of them as my moat, outer wall, and inner wall defending me from life's financial emergencies. :) I guess my retirement savings is in a chest in the inner keep. lol
Luckily I did not have such an emergency which needed to be covered (or wasn't by insurance) yet but in any case I have saved up enough cash to be able pay most important stuff (rent, car payments and insurances) for a year. Yeah I had to live for couple more years with my parents while I built it but thanks to their support both of them and I can sleep more soundly :)
How do you guys survive in that country. I’m from Europe and I believe that all countries here have paid medical leave. In my country is 60 days/yr and it’s paid 75%.
How to figure emergency fund: Take the most expensive of two of the following (usually it’s 1 and 2, but maybe not): 1) job loss 2 months INCLUDING COBRA* 2) job loss 2 months INCLUDING COBRA 3) if you rent. Your lease break fee plus 2 months rent plus $100. Enough to get you out of your current place and deposit/app fee into a new one. 4) the most expensive thing that can go wrong with your house (AC, furnace, roof) if you own 5) an expensive car repair. Say $5000 6) a car somewhere between used and beater (6-10k) 7 the combined total deductibles on the biggest two of the non medical insurances you carry (usually house and car) 7) the individual out of Pocket maximum on your health care plan. 8) the out of pocket maximum on your SO health care plan. Or combine 7-8 to be your family OOP max. 9) the going rate for a lawyer in your area ($200 usually) times 50. Covers a lot of legal issues that could pop up. 10). Unexpected funeral. Figure the cost of the combined. 4 days off work. Plane tickets to the most expensive place you may have to go with a moments notice (full fare). $4000 burial and hotel and rental car. Worst case scenario for a funeral. 11) $10,000. This is a general recover fund. If your house burns down you still have insurance but will need hotel and be eating out a ton. Insurance doesn’t cover everything * people forget that when you are unemployed you have to pay the full cost of your health premium during that time under COBRA. Figure the minimum you need to live in a month. PLUS four times whatever you pay for healthcare at work (if you are paid biweekly, 8 times) This covers any two of those most common life emergencies. The odds of more than two happening are pretty unlikely.
I agree with having 3 months of an emergency fund, but after that's reached I move money into an emergency investment fund; low to mid-range risk. Savings accts. bring in about 0.05%, while bonds and other investments might bring in 3 to 7%. But to start I always recommend to look at where your money goes and spending habits; I think everyone throws away some of their money, whether they know it or not. When I saw where I was loosing money, I took steps and that money went into emergency funds + food in the pantry.
Emergency funds are pointless unless you are completely debt-free, but most of us have crippling student loan debt, car loans, and/or credit card debt. Putting money away in savings that could've gone into paying that debt is like having a loan for which you're paying interest. Now, I did the math in my situation, and with Medicare for All and student debt forgiveness, I'd be able to pay for my car much faster and finally have some real emergency savings.
@@firstname8468 Because of corona? Please! If you had had debt and an emergency fund of three months by the start of the pandemic and you had been laid off, you'd be cashless right now because you would have used most of the money to pay your debt installments + interest every month. If you had been debt free with the same amount of money in the emergency fund, you'd still have cash right now, with no additional money wasted on loan interests. If you did not have an emergency fund because you focused on paying debt, then you'd have a greater percentage of the government assistance available to you every month because your debt installments and interest would have been lower.
I think another thing to consider is when taking a job is to compare your after-tax salary with the cost of living. after doing the math I realized that working as a tefl teacher in Shenyang China at 22000CNY is as good as earning 60000 a year in the USA due to the cost of living. It costs 700 a month for me to live in Shenyang China if i were to eat out 3x every day, rent a one-bedroom apartment, and use the subway every day. and maybe buy an outfit and have a haircut. This means I can save at least 2500 of my salary. If i lived in the USA i would likely pay at least 2500 a month in expenses and would come out the same
After i retire in 27 years i want to retire in either South America or South East Asia so I can live in a tropical climate where I am surrounded by hot humid weather and lots of exotic healthy food. Not to mention that the cost of living is cheaper. I figure I can afford to retire after i have saved up 500000 and have it invested in bonds that equal at least 6% interest which is what the Russian government is offering. I also figure I would like to renounce my US citizenship in the future so that the USA cannot steal my money.