“One of the tests of leadership is the ability to recognize a problem before it becomes an emergency.” – A.H. Glasgow. This is true also with financial emergencies. Here’s how to be sure you’re ready to handle it.
Money is a hot topic.
For some because they see it as the root of all evil, for others because it’s all they think about. I like to take a balanced approach, as much as possible.
Money won’t make life worth living in itself, but even the Bible dedicates a lot of space to talking about our attitudes and actions involving money.
It has more than 2,000 references to money and this tells me it’s something worth paying attention to.
I see money as a means to an end. It pays bills, buys necessities, blesses us, and allows us to bless others.
We receive it as fruit of our labor, and use it to invest in the things we care about. It is also necessary to have money to get by in this world.
While money won’t handle all emergencies, like those of health or relationships, it is necessary to pay for medical bills, home maintenance, or in case of a job loss.
Sure God will step in and bail us out on occasion, and praise God for it! rnrnHowever, if we’re constantly needing a miracle from God to pay every bill (unless we’re in a time of layoff, unemployment or crisis) then there’s something fundamentally wrong in our approach to money.
Most of the tips below are ways to generally handle money well so you’re prepared for emergencies. They’re not set in stone, but they’ve worked for us and I hope you find some that work for you too!
Are You Equipped to Handle a Financial Emergency?
If you’re asking yourself this question, it may be time to listen to that small voice of warning and buckle down on some things.
It may be as simple as changing some every day habits, or it may be more substantial like needing to pay off debt. Whatever your exact financial situation is….these 8 tips can help:
In just 15 minutes a night (while you’re in your pajamas!) take your home (and heart and mind) from stressed out to organized.
1. Create A Separate Account to Offset Financial Emergencies
Designate a separate account to use only for financial emergencies. You can decide what dollar amount you would like to stash away each month into this untouchable account.
If you get a savings account linked to your checking account you can easily transfer funds between them for emergencies.
For some, leaving money in your checking account will mean you are far more likely to spend it, and won’t have what you need if the time comes. This is the most basic and first step.
2. Develop a “Save First” Habit
Immediately after being paid, we tithe and save. Or rather, I schedule the saving and tithing to come at the beginning of the month. They get pulled out like normal bills.
Since I’ve budgeted I know exactly how much we can save that month and I’ll transfer the saved money before it has a chance to get spent on anything else. This may feel risky, but if it’s in a linked account it’s no trouble to transfer back if a need arises.
Which leads me to my third point…
3. Automate everything you can
Another great way to ensure you are prioritizing and budgeting well is to automate your finances.
Most pay checks come into the account automatically now, so why not set up your bills to do the same?
Tithing, electricity, mortgage, retirement, etc. can be withdrawn automatically and this will prevent you from having late payments or over-spending leaving too little to pay your bills. I recommend never leaving savings to surplus. Decide an amount and save it.
Then, later if there’s extra, you can save that too.
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God has given us our situation, talents, and skills that earn money, and we tithe without even thinking about it.
In Derek Prince’s book God’s Plan for Your Money, he told an interesting story of a pastor during the Great Depression. This pastor’s church had enough resources to help those in need, and he asked every person who came through the door the same question. “Did you tithe regularly when you had an income?”
Not one person who came into his office asking for money had tithed regularly. This isn’t to say that tithing is some magical bulletproof protection, but there is a definite spiritual principle at work.
5. Don’t Deprive All The Time
While I will say we are savers, it isn’t out of some grand frugal strategy. We try to purchase minimally, and yet we don’t have a habit of depriving ourselves.
Within reason we will shop, go out to eat, or go on vacations. Trying to be “too” frugal or “too” stingy will only mean your choices and habits are simply unsustainable. Or you feel hard done by and then go on a splurge because you feel entitled to it.
If you budget with some “give room”, you’ll feel more able to continue on your financial plan to eventual freedom. Unbalanced spending is what can lead to financial emergencies in the first place.
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6. Don’t Spend Windfalls to Prepare for Financial Emergencies
A windfall is a piece of unexpected good fortune. It’s a chunk of money that doesn’t come in regularly.
I know some families will do exactly the opposite of this, but we rarely spend windfalls. When an unexpected amount of money comes in, like a tax refund or a bonus, we pay off outstanding debt or – if there is none – save 80 to 90% of it.
If there was a necessity we’d use it obviously, but we don’t look around for a big purchase just because we have a large chunk of money coming in.
This is what helps build up your cash reserves.
7. Systematically Pay Off Debt
If you have car debt, student loans, or credit card debt, now is the time to pay them off in whatever way you can.
Proverbs says the “borrower is a slave to the lender” and, boy oh boy, this is true. If you’re a slave to Visa, Amex, and Bank of America then you’re not in control of your own life.
Would you be able to pay in full if your debt got called in today? Of course, most wouldn’t.
Think about your debts as actual lack of control over your life – because it is – and this’ll help you start knocking off those payments.
Drowning in debt can feel overwhelming and lead to financial emergencies, but develop a system for payment and you’ll be able to break free.
8. Be a Smart Saver and Spender
Being a smart saver and spender leads to financial freedom…
It also means you’ve learned when and what to do with your money. Sometimes you need to spend some money to invest in yourself. Sometimes you need to forgo a purchase to save.
Depending on your life stage, life season, and state of health the amount you need to save may vary.
Being a smart saver and spender doest mean you dwell on money and make it an idol in your life. What it does mean is you’re avoiding financial emergencies and giving your family financial freedom.
God calls us into different situations in different seasons. Sometimes we may find ourselves with far more than we need and other times lacking. Always with faith, always knowing from where our money comes, we should be using our common sense and godly wisdom to plan for the future.
Financial Emergencies Can Be Avoided
I know many see worrying about money as a “lack of faith” but I think that’s absolute malarkey. And it’s usually said by people who are stone cold broke and need others charity to pay their bills.
Don’t send me hate mail.
The biggest reason for getting your finances in order is that if you don’t have money, you’re constantly in need of it. And the less you have for emergencies, the more emergencies you have.
Lauren Tamm says
We always save first too…I saw this thing on TV a long while back and the financial adviser said to always “pay yourself first” meaning save and invest in your long term financial future before running out to pay Starbucks for an overpriced coffee. We budget every single month and hold weekly financial meeting to see where we are at and hold each other accountable. It’s eliminated about 95% of fights over money and it’s helped us feel happier in our marriage. Great tips and advice…sharing now :)
Rachel Norman says
That is exactly the phrase, Lauren. Pay yourself first! !!!