30-Day’s Cash

How much cash does a person need to survive a month of no income? While we cannot plan for every emergency, we can give ourselves a safety net that will give us a little peace of mind. If you were to lose your job for some reason, you would have at least one month to find work or retrain. Here are some things to take into account when planning your 30 day emergency fund.

Gas

What if gas prices are high? How far would a tank of gas get you? What if gas prices rose to twice what they are now?

Currency

What kind of currency will you need? Precious metals may ride out any fluctuations in the dollar value but what happens when it comes to paying? It is a good idea to have your cash in small bills and some coins. If you have nothing but hundred-dollar bills and there is no way to get change then you may be forced to pay a hundred dollars for something that only costs a few bucks.

Emergencies

What unexpected problems might eat up your cash, like car trouble, medical problems, or plumbing disasters? It is impossible to know whether it will be minor or devastating, but a few hundred bucks already set aside is a great blessing whatever happens. You will be glad you did.

Food

How much do you spend per month on food? Such a time would certainly demand that you cut down on outings and pizza nights. However, just because the future is bleak doesn’t mean you’ll have to boil leather either. You need good nourishment, especially in stressful situations. Save enough to be able to eat well and even have a few comfort foods.

Though this article is focused on money, I should mention that in addition to your financial reserve you need an actual storage of food. Stocking up now gives you the freedom to find foods on sale or wait for case lot sales. We cannot hope that food will be cheap when we need it most. The same goes for fuel and clothing.

Season

You never know what time of the year you may need to pull out the emergency fund. What difference is there in your expenses during the winter vs. summer? Imagine an exceptionally cold winter. The cost to heat your house could rise outside the planned budget, which could throw your whole budget out of proportion.

Education

What if you had to get some kind of training to be able to work again? A mechanic from fifty years ago would have a hard time finding work in these days of computerized cars and alternative fuels. Who knows what new of technological advances might render your marketable skills cheap or useless? Statistics show that the average person changes jobs seven times in their lifetime. The odds are not in our favor that our current employment will last us our lifetime. Things happen and times change. At the very least, you should expect to have to upgrade your skills. 

Security

Another issue to plan for is where you are going to keep all this cash. The logical place would be the bank. What happens if your bank shuts down for some reason? (Insert a few examples) The alternative would be keeping it in your home. Obviously, this presents some risk. A coffee can with thousands of dollars is enough to entice all kinds of scum. A safe box is a good investment if only to stash important documents. There is a variety of such boxes on the market. There is a box for whatever level of security you want, be it child-proof, waterproof, crush proof, fire-proof, or all the above.

After everything, though your first and greatest line of defense will be a zipper on your lip. This is not fool-proof though and should be backed up. If it becomes common knowledge that you keep cash stashed in your home you might be able to feed that rumor a red herring. Find a reliable blabbermouth and let slip that you moved it to a bank. On the other hand, you might make it so outrageous that it turns into myth. You could say that you have an underground vault with armed guards or that you spent it gambling.

Safe boxes are a good idea, but a burglar might just decide to take it with him and crack it elsewhere. A better idea is to get a floor safe or come up with a hidden place to stash your cash. It wouldn’t hurt to find a way to camouflage or hide your safe, like building it into the wall or some such ploy. The poor man’s version might be to stick with the traditional coffee can under the bed. Who does that these days anyway?

How do I start?

For even those with no one depending on him or her all this adds up to a pretty big price tag. However, for anyone who is working, it should not be very hard to set aside the necessary cash. It might take a while, but if you are living within your means then there should be a few bucks every month that you can put in a can. Keep the cash separated and labeled so that you know exactly what you have covered. Something I used to do is use envelopes and write on them what the money inside was for. That was before I upgraded to the underground vault.

It doesn’t make sense to put yourself into debt or take away from current expenses to reach your goal. There are a few ways to accomplish this. You might find financial drains that can be plugged or funneled into your 30-day savings. Some examples of such drains are as follows: household inefficiencies (wasting water, and other utilities), frequently eating out, toys (electronic gadgets, motorized recreation, etc.), home improvements, trips and vacations, TV, etc. Understand, I’m not saying that these things are bad, but when one’s spending is beyond one’s means there is a problem, and a little evaluation could fix it. You know what is essential and what really is not. It can be hard to change some spending habits, but imagine how you feel when there is too much month at the end of the money and you recall where your money went. When food gets scarce or the kids are sick, it gets hard to justify having a boat.

The first thing you should do after deciding to act is make a plan. Plan whether you will save by redirecting funds, finding part-time work, or both. There are many plans on the internet that help people painlessly amass a respectable sum over time. A secondary source of income might even become your primary source if things go awry at work. Use your own judgment to figure out how aggressively you will save and how soon you will reach your goal. Eventually this fund should be increased to six months and then a year but 30 days is a practical start, plus it will put you in the right mindset to continue saving.

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3rd World Living (continued)

Recently I spoke to a man who grew up in a family where hundreds of thousands of dollars changed hands on a daily basis. Money was certainly not a problem for them. I mentioned my ideas to him about how the way we think and understand things affects our circumstances.

I asked if he had observed something different about the way his family thought and did things. He thought  for a minute and then said that he had. He said that most of his friends got an allowance each week. He asked them what an allowance was, they said that it was money that they got from their parents each week. He asked what they did to earn it. They said they didn’t have to, that it was what their parents owed to them. ??? He mentioned how his father would give him and his siblings money but always in return for work. This was nothing new to me, I had to work for every cent that I received.

He also said that his father talked about the role of risk and how there is no gain without risk. I found that interesting. I had no concept of risk in relation to money. Only recently have I begun to understand how value can be created through strategic use of risk. That is where I need to investigate more thoroughly in the near future.

The man is now a Real Estate salesman, making million dollar deals on a regularly. He found that he was good at and enjoyed sales when he was in high school selling subscriptions for school publications. So he worked at a few different firms and eventually started his own business. He is doing very well, from what I have observed.

It makes me wonder what other things people learn in their youth which leads them to make winning decisions throughout their life.

Gold

What is there to know about gold? I hear that it is a good hedge for investment. If it is so great as a hedge then why not a main asset?

What if I was to buy a bit of gold, wait until it appreciates a bit and then sell some of it to someone and immediately use that money to buy more? Then I would begin to stockpile gold and it would just keep getting bigger.

Buying gold would be better than just having cash because the value would not depreciate as the dollar does, and if I needed to use it I could sell it pretty readily for cash. Also, I would be less tempted to spend money that is tied up in something like that.

Do I have enough to buy anything?

Who would I sell it to?

Would I need an exit strategy? If the price of gold dropped what would I do? Hold on to it? Sell it immediately? To whom would I sell it?

After a little research I found a few answers and a few more questions. I would need at least $50 to place an order with APMEX. I could set up an account for free storage or have them ship my order to me. I could get one 1/10 ounce gold coin for about $180. I could get a lot more silver or other precious metals for that price, or even just spend less.

I don’t know what implications are involved as far as insurance and taxes. I read in several places that they recommend you to consult a financial expert about taxes on investments and the specific laws for the country and state. There are also a lot of words and terms to get familiar with, but that didn’t look too difficult.

So my next step for this is to talk to someone.

How much will it take?

I went to crunching numbers to see what exactly I am up against.

In order to reach my goal of $100,000 by 2015, even with what I already have saved I will have to make $4,700 every month starting now. Never have I seen that kind of income. That’s about how much I have made in one summer, and about what I’ll have saved after the entire year (after expenses, taxes, etc).

My current monthly expenses are (approx.):

Food: $80

Gas: $150

Car Insurance: $35

Utilities: $40

Housing: $200

Phone: $35

Total: $540

So assuming that my living expenses stay the same I will need to earn about $5,240 every month!

Currently I have barely 1% of my goal.