chAPTER 8~"SAVE AND INVEST"

For years I resisted savings because I felt guilty.  Who am I to have abundance when there is so much poverty in the world?  How can I develop assets when others have none?  My heart for others made me averse to savings. 
 
And so even though I had made a half million dollars in my working lifetime, I was still “bleeding” my money away:  with out-of-control spending, the debt game, and no plan.  It took developing a giving practice and also being close to poverty as a single mom to help me feel deserving of savings.
 
Being close to poverty was a big wake-up call for me.  Saving meant the difference between paying for food out of pocket and foods stamps.  Saving meant choices about what kind of work I did.  Saving meant security. 
 
Out of this experience I began to realize that I can give AND save.  Giving helps me feel I am making a difference, and contributing to my community and my world.  And Saving helps me feel secure.
 
Once you are motivated to save, there are some basic things to focus on that involve creating security, and then building a legacy.   First focus on your 4 Walls, or the basics of your household. Next, focus on Debt Elimination, so debt is not eating up your wealth.  Then save an Emergency Fund of 3-6 Months of Expenses in Savings for both Business and Household, so you are secure for any storm(we saw the importance of this with the COVID-19 slowdown!) After that focus on purchasing a Home because owning a home statistically boosts your wealth.  And finally focus on Retirement Savings, so you have choices for your future and can build a legacy for your family.
 
So what are you waiting for?  Start piling up cash!  It is possible, even in an economic slowdown.

Yes downturns happen. We’ve seen this with the Coronovirus.  But you will get through this.  Just as I got through being a single mom.  No season lasts forever.  And hopefully this will be the time you say "never again" to being in debt with no savings.

For now, keep your attitude positive and keep looking for the silver lining.  Stay in touch with those who cheer you on and want you to succeed.   And just start saving.
 
THE SAVINGS STEPS:
 
1.  STABILIZE YOUR HOUSEHOLD
 
If you are low-income, or in crisis, I recommend you start with the 4 Walls.  Start with taking care of your castle first.  Then you can start giving and saving.  The 4 Walls are: food, shelter, transportation and utilities.  Place all debt payments on hold if you need to as well. 
 
Talk to your landlord/mortgage company if you need to defer payments.  Most reasonable people will work with you.  Go to the food bank if needed.  See if you can carpool or reduce your transportation costs.  Talk to your utility company so you can keep the lights & water on.

Once your household is secure, the first saving step is to accumulate $1000.  We talked about this in the “Making Margin” chapter.  This beginning emergency fund will help you deal with small emergencies and keep them from destroying you.  Sell stuff online, take on a side hustle, cut out all unnecessary bills, etc.  Review “Making Margin” if you are not sure how to save $1000.

2.  FULLY-FUNDED EMERGENCY FUND

The next step is to accumulate 3-6 months of expenses in savings.  This bigger cushion will be the biggest gift you can give yourself.  Believe me!  Once I had this fund, as a single mom, I relaxed in a place I didn’t even know I was tense!   I finally felt peace of mind.
 
My clients report that they have fewer “emergencies” once they have built the emergency fund.  Rather than being a negative attractor of danger, the fund seems to repel problems.  And when problems arise, they can be handled with a lot less drama.
 
When we save, we create security.  Statistically, most people will have a negative financial event(divorce, death in the family, economic downturn, loss of work, illness, etc.) at least once every 10 years.
 
In the past, I thought if I only “thought positive” enough, I would not have any emergencies.  I actually thought an emergency fund would create problems for me! While I do believe positive thought in general is very important, this reliance only on positive thinking was a little naïve.
 
Have 3-6 months of expenses in the bank~average household has $10,000
 
*Ask yourself, “What would it take for me to live for three to six months if I lost my income?” Your answer to that question is how much you should save.  Use this money for emergencies only: incidents that would have a major impact on you and your family:  unexpected household repairs, car dying & needing to be replaced, medical bills, etc. Keep these savings in a money market account. Remember, this stash of money is not an investment; it is insurance you’re paying to yourself, a buffer between you and life.
 
*This savings is essential before you start investing in assets such as real estate, or investing in the stock market, because it is liquid cash.  Investments are often not quickly liquidated.
 
*$10,000 in the bank is an average household emergency fund.  Some people want a little more, a little less.  If you have a very secure job and your spouse is working, you can lean toward 3 months of expenses.  If you are single or do not have a secure job, lean toward the 6 months rule.
 
How much do you need each month to cover your expenses?  Multiply that by 3 or 6 to get your “Fully-Funded Emergency Fund” number:
 
Suze Orman recommends people have 18 months of expenses in savings.  If you want to save that much for your security, go for it!  I personally found that saving 6 months worth, and then going on to save for a home and start investing gave me more momentum.  Since then we have gone back and “beefed up” the emergency fund to be a little larger than it was before.