My journey and reflections in life…
In my previous post “Do You Control Your Cash?” I mentioned there that Bo Sanchez suggested in his talk “Control Your Cash” that everyone should save for an emergency fund . What is this emergency fund? Do I really need to save for it? Do you need it? How much should I put into this emergency fund?
More than a year ago, my mother was diagnosed with advance stage of colon cancer. From then until her death, we brought her in and out of the hospital and went into an emergency surgery once. Me and my three brothers never had this so called emergency fund even our eldest brother who had been working abroad for over a year. Good thing though is, one of my brothers is earning good in his sand and gravel and trucking business so he was able to take care of mom’s financial needs. However, even he cannot sustain it for long all alone. Our mother’s siblings and some of their children contributed some considerable amount too. At the time I have just switched jobs and barely earning enough. Perhaps the switch was a blessing in disguise, though. For my new employer happens to be a friend of mine and one of the most prominent businessman in our city. I was able to loan some amount from him more than once. One of my sisters-in-law borrowed some money too.
I supposed it is quite clear what happens next. I accumulated a loan of about PHP 45,000.00 for my mom’s hospitalization, plus another PHP 10,000.00 another friend. Perhaps I’m just lucky to have a couple of friends like I have that are willing to help. Afterwards though, I had to pay those debts. I started paying them for over a year, and upto now I’m still paying those debts.
Now that I am just starting a family of my own, I am in dire need of cash again.
Only if I had known to save for emergency.
For the question do you need to put up an emergency fund? The answer is a resounding YES!
Next question to answer is:
How Much Such Should I Put Up For My Emergency Fund?
First of all, if you in a number of Bo Sanchez’ talks and teachings, he emphasizes that in order to be financially free, we should set aside at least 20% of our monthly income for our savings and 10 % to tights fund and live only on 70% of our income.
The 20% is divided into three, and set 6.667% of your monthly income for each. They are:
(see my post: Do You Control Your Cash? )
Also he mentioned in his talks that we should put up an emergency fund that is equivalent to 3 to 6 months of our salary. Once you have reached that target, add the 6.667% to your wealth fund. If you come to think of it, this suggestion is quite very practical and very useful… well in case of emergency.
For now, perhaps, the biggest challenge is to live by 70% of our monthly income. I’m sure there will be all sorts of reasons that we believe that we can’t live on 70% only. What is important is we have to change the way we believe and start a new decipline to live only on 70%.