One should always have money set aside for unexpecting events. I write about this, in length, in Chapter 14: We Don’t Prepare for the Unexpected, of my book, How We Prevent Wealth: A Personal Finance Reflection. Ideally, one should have a set amount going into an emergency savings account every month, even if it’s only $100. The more one can save in an emergency account the better off financially he or she will be able to handle unexpecting events–like overflowing toilet water flowing onto their home’s entire first floor.
Some may find that it’s difficult to put $100 aside. However, I would be the first to question the validity of this statement.
All spending will become psychologically less important once saving for an emergency becomes a priority. When saving becomes a priority, for example, one would restrict him or herself from buying say, a $8 burger meal, if he hasn’t met his monthly savings goal.
One of the things that I wrote recently on the Life and Personal Finance Facebook Page was how I view and spend money. In a nutshell, I try to maximize the money that I have to spend and save by minimizing the amount that I spend on everything, including cell phone service (BOOST Mobile, baby!). If this philosophy becomes the philosophy of others, they can easily find an extra $100 to save monthly. There is no doubt about it.
I question every purchase I make. I ask myself, “Self, can you get this item for a less expensive price?” If the answer is yes, you’ll often find me putting something back and walking out of the store.
I sometimes take days or weeks before making big purchases. For example, it took me almost two years before I finally decided to replace my leaning dining room chairs. And I’ve been out of printer ink for about 4 weeks now. I refuse to spend $16 for ink!
Trust me, most people are embarrassed after going shopping with me. I’m always looking for a bargain. Sometimes I’m not able to save much money when there are no quality alternatives, but this is rare.
Anyway, try to use my philosophy for spending money for the next month by questioning everything you buy. Do you need it? Do you just want it? Is there an alternative pricing point? Have you checked on the Internet to see if you can save more than what you would spend in a brick and mortar store?
When you make questioning your purchases a habit, and stock the money that you save into an emergency fund, you won’t be affected too much when you awaken to a carpet full of toilet water that will ultimately cost more than $800 to restore.
Note: The minimum payment of $800 noted above assumes that you are paying the average low-cost of around $15 monthly for renters insurance, or paying on a home owners’ insurance policy. The total cost for my water restoration service and carpet/tile repair will be at least $3,500, paid for courtesy of USAA home owner’s insurance.
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DisclaimerThe opinions expressed on this blog are mine and represent my views only. I have very strong opinions, but am also an open-minded individual. If you refute my view with supported, educated and well-argued points, I could very well change my opinion.