Emergency Savings

I emphasized that the key to improving your financial health was changing your behavior and also finding a partner who will hold you accountable to your plan.

The only way you can get out of your financial struggle and build a successful future is by sticking to a written cash flow plan. Notice that I did not call it budget.

Here are simple things that will make a huge difference.

In your cash flow plan, create an expense called “emergency fund savings” and list it as your very first bill. Even if you feel that you live paycheck to paycheck and there is no room for savings, you can’t afford not to have it. It is critical that you assign some dollar amount here and stick to it.

When you subtract your expenses from your monthly take home pay and you see that you don’t have enough money to cover all of your expenses, don’t automatically assume that you will just cover the hole with your credit card. That is a self-destructive behavior and you need to stop right here. Instead cut up your credit cards, pretend that they are all maxed out, and pick one expense that you are willing to live without.

By following these steps, you will eliminate the two most disastrous things that get people into a financial crisis, which is spending more than you earn and adding to your existing credit card debt.

Do this for 6 months, coupled with a debt repayment plan, which we will cover next time.

I can promise you that you will sleep much better at night.