STEP 6 - SAVE SOME MORE CASH
Welcome to Step 6! If you are here, it means that you are debt-free (except for your house)!
Let me start off with a HUGE congratulations! Do you realize that you are in a financial position that most grown adults never see in their lifetime? Once again, AWESOME JOB!
Now it’s time to save some more cash.
You already have your small emergency fund of at least one months expenses from Step 4. You now should build upon that foundation and save for a rainy day. By rainy day, I mean a bigger emergency.
In this step, I want you to save at least 3 months worth of expenses (the essential expenses from your spend plan). I say at least, because you may need to save more (6+ months). If you are in a secure job (think Government entity), you may need to save only 3 months. However, if you are in a job where layoffs are numerous or you are thinking of starting your own business, you should save WAAAAY more than 3 months.
You may be thinking, “how in the heck am I going to save that much cash?”. Well, it should be pretty darn simple now that you do not have any debt payments weighing you down.
All I ask is that you sit down with your family and determine what a good cash buffer is. It should be a group decision (or just yours if you are single).
These funds should be kept in a very liquid account (think online savings account) so that they can be easily accessed in an emergency situation.
Keep in mind that by “emergency” I do not mean a new car because you “deserve it”, furniture, college expenses, etc. This money is only to be used in extreme financial emergencies (think job loss, medical, HVAC explosion, etc.).
Start saving today!