Episode Transcript
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Kevin Bass (00:06):
Today, we're talking
about one of my favorite topics
building an emergency fund.
Yeah, I know, maybe not themost exciting thing to hear, but
stick with me because this isyour financial safety net and,
trust me, you're going to wantone.
Welcome to Low Income Rich Lifethe podcast that helps you
(00:32):
prepare for a secure andfulfilling retirement, even on a
limited income.
I'm your host, kevin Bass.
Each week, we'll explorepractical tips and strategies
for getting out of debt,lowering expenses, living a
simpler life and finding truecontentment, Whether you're
nearing retirement or juststarting to plan, join me as we
navigate the journey to abrighter future.
Let's discover together how tomake the most of our golden
(00:52):
years without breaking the bank.
Before we dive in, I want toremind you guys about our
awesome emergency fund challenge.
We've got going on over in ourFacebook group.
If you haven't joined yet, whatare you waiting for?
Jump in and let's startbuilding that safety net
together.
We're setting goals, sharingwins and keeping each other on
(01:17):
track.
Plus, I've got a cool tool yep,a tool my very own emergency
fund tracker that you candownload and start using right
now, but more on that later.
All right, let's get real for aminute.
Emergencies they're inevitable.
They show up like an uninvitedguest, usually when you're least
prepared.
Car breaks down, yep, that'llbe $800.
A surprise medical bill?
There goes another $500.
Emergencies don't care ifyou're on a budget or not.
(01:39):
And let me tell you, havingthat emergency fund is like
having a little financial shieldready to absorb the blow.
Think of it this way If life isa game of dodgeball, the
emergency fund is the personstanding in front of you taking
all the hits.
So you don't have to.
And let me tell you, this fundis going to help you sleep
better at night.
You won't be lying awakethinking what if the car dies
(02:00):
tomorrow?
What if I lose my job?
Instead, you'll be thinking, eh, no big deal, I've got a buffer
.
Now I know what you're thinking,kevin.
How much am I supposed to savein this emergency fund?
Well, let me start by saying itdepends.
I know.
I know everyone hates thatanswer and I do too.
But seriously, it depends onyour situation.
But here's the golden ruleStart with $1,000.
(02:25):
That's your baseline.
It's not the finish line, butit's a good place to start From
there.
You want to aim for three tosix months of living expenses.
I know that sounds like a lotand trust me it is.
But once you've got that $1,000saved up, you'll already feel a
weight lifted.
And you're not saving this allin one go.
It's a gradual thing, small,consistent steps.
(02:46):
And here's where my emergencyfund tracker comes in.
You can set your savings goal,plug in how much you're putting
away each week and visually seeyour progress.
It's like having a littlecheerleader in your spreadsheet,
and if you're like me and needa little extra motivation,
seeing that progress bar fill upis almost as satisfying as
finding money in the pocket of ajacket you haven't worn in a
while.
(03:06):
So how do you build this magicalfund?
First, let's get one thingstraight it's all about starting
small.
I know saving thousands soundsdaunting, but here's the thing
you don't have to do it all atonce.
Think of it as small baby steps.
One of the easiest ways to getstarted is to automate your
savings.
Set up an automatic transferfrom your checking account to a
(03:27):
separate savings account.
It's like magic.
You won't even notice the moneydisappearing until, boom one
day you check and there's a nicelittle chunk sitting there, out
of sight, out of mind, untilyou need it.
Now let's talk about cuttingnon-essential expenses.
This is a big one.
Do you really need that $5coffee every day?
(03:47):
Listen, I love my coffee, butcome on, let's be honest.
Little changes like this canmake a huge difference over time
.
It doesn't mean cutting outevery single thing you enjoy,
just being mindful of where themoney is going.
And hey, don't forget aboutthose windfalls.
You know the little financialsurprises that come your way Tax
refunds, birthday money, maybeselling something on Facebook
(04:10):
Marketplace.
Throw that extra cash into yourfund.
That's your fast track tobuilding it up without feeling
like you're making a bigsacrifice.
All right, so you've startedbuilding your emergency fund.
Now where do you put it?
You want it somewhere that'seasy to access, but not too easy
.
Otherwise, you might dip intoit for non-emergencies, like
when your favorite bandannounces a reunion tour and you
(04:32):
just have to go.
The best place is a high-yieldsavings account.
Why?
It's safe, it earns a littlebit of interest and it's not
sitting in your checking accountbegging you to spend it.
And let's face it, most of usneed all the help we can get to
when it comes to resistingtemptation.
I use one myself and it's been agame changer.
You can access the money if youneed it, but it's not sitting
(04:55):
right there in front of you.
Now let's talk about thisemergency fund tracker I've been
hyping up.
I've created a tool that'ssuper simple to use.
You enter your goal, track yourdeposits and my favorite part
you get a progress bar thatshows how close you are to
hitting your target.
Trust me, once you see that barmoving, you're going to want to
keep going.
It's like a little dopamine hitevery time you save.
(05:17):
And if you're a little moreadvanced or getting there, I've
got a new and improved versionof the tracker that's in the
works.
This one will let you calculateyour emergency fund goal based
on your actual expenses.
It's going to be a game changerfor anyone who's serious about
nailing down those three to sixmonths of savings All right.
Now that we've covered thebasics of building an emergency
fund, I want to dive into somecommon questions people have
(05:40):
about this topic.
These are things I've heardfrom folks just like you, and I
think they'll help clear up alot of the confusion around
saving.
A common question I hear is howmuch should I save in my
emergency fund if $1,000 feelsimpossible right now?
That's a great question, and Iknow $1,000 can sound like a big
number, especially if you'reliving paycheck to paycheck.
(06:00):
The key is to start small.
If $1,000 feels out of reach,aim for just $500 or even $100
to begin with.
The goal here is progress, notperfection.
Start by saving whatever youcan each week or month, even if
it's just $10 or $20.
The most important part isbuilding the habit of saving.
Once you get that momentumgoing, it becomes easier to
(06:23):
increase your savings over time.
And remember small amounts addup quicker than you think.
Another question I commonlyhear is where should I keep my
emergency fund at?
Well, this is another greatquestion.
You want to keep your emergencyfund in a place that's easy to
access, but not too easy,meaning don't leave it in your
checking account, where you'retempted to dip into it.
(06:44):
I recommend using a high yieldsavings account.
These accounts earn a bit moreinterest than a regular savings
account and your money is stillaccessible when you need it.
The key here is that you canget to the funds in a real
emergency, but you're not aslikely to spend them impulsively
.
Question three how do I keepmyself from using my emergency
fund for non-emergencies?
(07:04):
Ah, this is a big one.
The temptation to dip into youremergency fund can be real,
especially if it's sitting therelooking all tempting.
One way to avoid this is bygetting very clear on what
qualifies as an emergency.
Things like car repairs,medical bills or unexpected job
loss those are emergencies.
Going on vacation or buying newclothes not so much.
(07:28):
Another strategy is to keepyour emergency fund in a
separate account so it's alittle harder to access Out of
sight, out of mind.
Right, and here's a tip Everytime you think about using your
emergency fund, ask yourselfwill future me thank me for this
?
If the answer is no, it'sprobably not a real emergency.
What if I have debt?
(07:50):
Should I focus on paying offdebt or building an emergency
fund?
And this is a common dilemmaand, honestly, it depends on
your situation, I guess.
But here's what I suggest Ifyou don't have any savings at
all, try to build a smallemergency fund first even if
it's just $500, beforeaggressively paying off your
debt.
Why?
Because, without an emergencyfund, you're likely to rely on
(08:12):
credit cards or loans when anemergency hits, which can just
increase your debt.
Why?
Because, without an emergencyfund, you're likely to rely on
credit cards or loans when anemergency hits, which can just
increase your debt, and having asmall cushion gives you a
buffer so that you're not goingdeeper into debt.
After that, you can focus onpaying down your debt while
slowly adding to your emergencyfund.
How long does it usually take tobuild a full emergency fund?
Well, this timeline reallydepends on your income, your
(08:35):
expenses and how much you cancontribute to the fund.
If you're starting from zeroand aiming for that first $1,000
, it might take a few months oreven a year, and that's okay.
The important thing is to stayconsistent and save whatever you
can.
Once you've built that initialfund, you can gradually work
toward the ideal goal of threeto six months worth of living
(08:55):
expenses.
Some people may take severalyears to fully fund their
emergency savings, and that'sperfectly fine.
Slow and steady wins the racehere.
The goal isn't to rush, it's tobuild financial security over
time and, more importantly,develop great financial habits.
And there you have it.
I hope these answers helpclarify some of the common
(09:17):
questions around emergency funds.
Remember, the key to buildingan emergency fund is starting
where you are, stayingconsistent and not being too
hard on yourself if the processfeels slow.
It's a journey and every dollaryou save is a step closer to
financial peace of mind.
All right, let's recap realquick before I let you go.
The first thing to remember isto start small.
(09:37):
Just aim for a thousand dollars.
To begin with it might seemlike a lot, but trust me, once
you start automating yoursavings, it'll grow without you
even noticing.
Set up that automatic transferso you don't have to think about
it.
It's one less thing on yourplate.
And don't forget, I've got thatemergency fund tracker waiting
for you.
It'll help you stay motivatedand, trust me, seeing your
(10:03):
progress laid out visually is agame changer.
You'll want to keep going justto see that bar fill up.
Now, where are you going tostash this fund?
Keep it somewhere safe but easyto access, like a high yield
savings account.
You don't want it sitting inyour checking account where it's
too tempting to spend, but youalso want to be able to grab it
quickly when life throws a crazycurveball.
And last but definitely notleast, join the Emergency Fund
(10:24):
Challenge.
We're all in this together,step by step.
There's a whole community inour Facebook group cheering each
other on, sharing wins andkeeping motivated.
You don't have to do this alone.
I can't wait to hear about yourprogress.
So go download the tracker,sign up for the challenge and
start taking those steps today.
Your future self will thank you.
And hey, if you found thisepisode helpful, I'd love it if
(10:47):
you shared it with someone whomight need that nudge to get
started.
Don't forget to subscribe andI'll catch you in the next
episode of Low Income Rich Life.
Thank you for joining us onthis episode of Low Income Rich
Life.
I hope you found today's tipsand strategies helpful.
If you enjoyed the show, pleasesubscribe, rate and leave us a
(11:08):
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Your feedback helps us reachmore listeners and improve the
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Don't forget to visit ourwebsite at lowincomerichlifecom
for additional resources, shownotes and links to everything we
discussed today.
You can also join me on ourFacebook page for more updates
and retirement tips.
(11:28):
Remember, a truly rich life isnot about how you spend your
money, but how you spend yourtime.
I'm Kevin Bass, wishing you aprosperous and joyful retirement
journey.
Stay well and stay inspired.