"A journey to a thousand miles starts with a single step." -Lao Tzu-No matter where you aim to go. No matter what endeavor you want to take. Whether it be a journey to a road less traveled, the first single step is necessary for without it you are fixed at where you are at. That is what the Chinese philosopher's message is driving at.
During our second meeting and the first session of the Financial Peace University (FPU), setting aside some money as an emergency fund is being emphasized. It is pointed out that this is not an option, but rather a must in one's journey to financial peace. The suggested target amount to be set aside should cover at least three to four months of living expenses.
In this first session, a lot has been taught that to some is not something new. Most attendees if not all knew all along the value of saving for the rainy day. However, that knowledge remains to be as such and was never put to practice.
Hence, the first baby step one who is aiming for the financial peace is to set aside $1,000 as an emergency fund. Of course the starting amount, or seed money as I would describe it could be lesser if one is earning lesser than the middle income earner. Everyone in our class is advised to do so, otherwise continuing on with the course is a useless undertaking.
Of course this emergency fund should not be touched unless for emergency purposes. What constitute emergency then? Emergency needs are those that arise from any negative financial event happening in your life. You may have been laid off from your employment. A sickness or accident not covered by any insurance protection. Or any event of such type. This fund serves as your protection as it covers you from this untoward incident that is bound to happen in one's life. For as long as your heart beats, the happening of this event is inevitable.
The concept of an emergency fund is even taught in the first book of the Bible. Remember when Joseph was given authority to rule over Egypt, second to pharaoh when he, by the knowledge and wisdom coming from God allowed him to interpret pharaoh's dreams. Everyone is familiar with this story of seven years of harvest and seven years of famine. The principle taught by God in this story of Joseph is to set aside something for the famine that is going to happen. We are simply reminded here that it sun does not shine year in year out. A rainy day will surely come.
Simply put, saving for a rainy day should be a way of life, not to be compromised if you want financial peace.
Not so long ago, in one of my articles I discussed about the danger of credit cards being used during times of emergency. Why should one resort to credit cards? It is because you have nothing set aside for this purpose.
I overheard a discussion of fellow kabayans in a planning session for an outing. One of the hot topics was the date the salary be released. That contribution for the outing should be deferred until the date salary would be credited to the respective bank accounts. This line of discussion led me to conclude that most of these people, if not all are cash challenged for they could not shell out a small contribution for a simple celebration for the birthdays of 3 or 4 people in the group.
Though the incident above is not a sort of an emergency, but the mere fact that most people are cash challenged even few days before the date of salary credit is something of a serious issue. How much more if we ask them if they have some savings set aside?
A personal observation made me believe that most working class citizens are living from paycheck to paycheck. This observation could be wrong, but that is what I perceive personally. You may judge this for yourself.
A final word of encouragement to those who want to take the lifetime journey to financial peace, begin with this baby step. Set aside $1,000 or any amount as your first baby step. From then on, make it a habit to set aside every payday a forced savings to this account until you amassed so much that may already cover three to six months of your living expeses.
This is just the first step. Keep coming back for future articles and other steps as I progress with my FPU class.
God bless everyone.
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