I participate in a few online groups that are dedicated to financial advice, financial freedom, the Dave plan, what-have-you. An ongoing theme that I've noticed is "emergencies" cropping up that completely derail any plan set into place.
They don't focus.
Let me tell you this. I'm no expert on life in general, but I do know that storms are going to come.
Big storms....baby storms.....things you THINK are emergencies. They're on their way. You cannot let them completely destroy your focus and your plan, as difficult as that is.
"THINGS ARE ALWAYS GOING WRONG"
You'll hear this a lot from people who may be "trying" to change their lives in one way or another....but, to them, things are always in their way.
"I'd quit smoking, but it's my stress relief and something is always stressing me out"
"I'd quit eating fatty foods....but I'm working long hours and it's easier to eat out than to cook"
"I'd work out, but when can I possibly find the time?"
"I'd stick to a budget, but things are always coming up that require money"
You're not going to like this, but these are excuses. If you WANTED to change....truly...in the depths of your soul...nothing would stop you. These issues would be baby road bumps, not huge sinkholes.
Life is going to continue to happen....it's preparing for the storm (instead of CREATING opportunity for storms) that makes all the difference.
WHAT'S AN EMERGENCY?
This seems to be a part of any financial plan that is hard for some folks to wrap their heads around. Exactly WHAT is an emergency....and what do we do when one arises.
This is simple: Emergencies are unplanned. Non-Emergencies....you know they're coming.
Christmas....not an emergency
Birthdays.....not an emergency
You've been told that in 6 months you may need some minor dental work. This is not an emergency
You have a super old, hoopty car with 300,000 miles on it. That car needing work? Not an emergency.
Now, lets say your kid is riding their bike and bites it....breaking their arm.
This is an emergency. : )
With the Total Money Makeover plan, you begin with a "Baby Emergency Fund" of $1000 to keep most "emergencies" away from your door, so as not to disrupt the debt pay off. Once the debt payoff is complete you fully fund that emergency reserve to 3-6 months of expenses. This is enough to, in most cases, take care of emergencies as they arise. So, this particular plan builds in an answer to the excuse of "I have to use my credit card for an emergency"
No you don't.....and how many thousands of dollars of "emergencies" have we put on those cards that were not TRULY emergency situations?
JUST BE STILL
The biggest thing to remember when things pop up that are unexpected is not to panic. Panicking leads to needless spending and bad decisions. Trust me.
We were ROCKING the plan 3 years ago and then my husband lost his job. We PANICKED, looking back. We sold his car....because we thought we would never be able to pay it off and we needed to lessen the burn of losing his income. We made rash decisions that looking back, now, we never needed to make.
Had we let calm prevail, we probably would have been able to stick with the plan then and we would have been done by now.
So let's take a typical scenario and work through it:
You have your $1000 baby emergency fund.
You know that your car is going to probably need new tires in a month or so.
What do you do?
Do you tap into that emergency fund? Not necessarily. If you BLOW a tire on the side of the road? Yes. But, if you know the need is coming, this is where the "sinking fund" comes in. You do your monthly budget and put a line item in there for "NEW TIRES". Then, you figure out how much needs to be funneled toward that need by the time you actually need it.
Sinking funds are how we cash flow things like Christmas, birthdays, seasonal clothing purchases, car repairs....things we KNOW are coming up. You can have sinking funds for whatever you know is coming.
HOWEVER, just be aware that any money you funnel towards the sinking funds is money being taken AWAY from your debt repayment.....so make sure these sinking fund items are more needs than wants.
The storms ARE going to come.....you just have to breathe....and realize that you are bigger than these little storms. Don't let a wind knock you off course.....and don't let excuses creep in that will stop you from hitting your ultimate goals.