It is fascinating to me how many women were never taught about money. They don’t know about savings, investments, credit scores, etc. or else they know about all these things but don’t care to do anything about it. The fact is that money management is still seen by many as a man’s job. I’m here to tell you that’s wrong. It’s plain wrong. Women today have a responsibility to know exactly what their financial situation is and have a plan to improve it. A smart modern woman isn’t dependent on the financial guidance of a man.
The most baffling thing I find when I discuss finances with my friends is how most of them don’t put anything in savings. They have no plan for financial emergencies. Did you know that the majority of people in the US live paycheck to paycheck. For a long time I was one of them, confident that my parents would step in if I ever needed help.
However, I count myself as very lucky that my parents stepped in before I needed them. My mother has always been adamant that I have “savings goals” and that I always pay my bills on time. She definitely made sure to teach me the basics. My father was the one who helped me delve into the details of financial planning. He has always said that he does not want me to ever be dependent on someone else, and he insists that I know exactly where I stand financially.
The first thing he taught me about was having an Emergency Fund. This fund sits in my savings account where it is easily accessed in case of, you guessed it, emergencies. In the 9 years I’ve had the account, I’ve thankfully never had to withdraw any money. But it’s there if I ever need it.
Your emergency fund should contain between 6 months to 2 years worth of money. The more, the better. That way if you ever find yourself jobless, injured, or unable to work for whatever reason, you’ll still have enough money to hold you over until circumstances improve.
There are three steps to setting up, and maintaining an emergency fund:
1. Determine how much money you spend in a given year.Add up all your bills, spending, rent, and other regular costs for a month. Multiply by 12.
2. Determine the amount you need to save.
Take your amount from step 1 and multiply by the number of years you want your fund to cover.
3. Set aside a set amount of each paycheck until you reach the amount you wanted to save.
A good rule of thumb is to set aside 20% of each paycheck. For most people, they can easily find a way to curb their spending by this much and it is completely worth it.