Everyone is talking about the government shutdown. This is the longest shutdown in history. I've lost count. This is day 25, or is it 26? The main reason I'm unsure is because I don't work for the federal government. But for many who do, the story is one of panic. The government shutdown has exposed a bigger problem in America -- financial foolishness. The reason many government employees are in a state of panic about the government shutdown is because they are not handling their finances wisely. They have no margin. They are living paycheck to paycheck. They are not financially prepared for contingencies and emergencies. And of all people, you'd think that government employees would be prepared, because there seems to be a shutdown every year.
But you should be prepared too. Even if you don't work for the federal government, your own financial shutdown is coming. They always do. You might get laid off. Your income might drop drastically for some reason. Your car might break down. Your air conditioner may finally kick the bucket. Your roof might finally give up the ghost. I hate to be the bearer of bad news, but your financial winter is coming. Are you ready?
Proverbs 22:3 "A sensible person sees danger and takes cover, but the inexperienced keep going and are punished."
Financial experts advise that if you want to "take cover" and be prepared for those inevitable, yet unpredictable financial shutdowns in life, then you need to have an emergency savings account at your disposal. This emergency account is not for Christmas shopping or vacations. It is not to be used to upgrade to the latest smartphone. It is for emergencies.
How much money should you have saved up in your emergency fund? Three to six months of living expenses. Notice the term "living expenses." That will probably be less than your monthly income, unless you spend every single dollar that you bring in. Figure out how much it takes for your family to live in a month. Just include the bare essentials. If you had to, you could get rid of the kids' smartphones, cable TV, the gym membership, you could stop going to Starbucks every morning before work, and you could stop eating out several times a week. Once you figure out what it would take to live in a month, then you need to save up three months of living expenses if you are a two-income family, and six months if you are a single-income family (like mine).
If you don't have your own emergency savings fund in place, then it needs to be your financial priority. I can't tell you how much weight it will take off your back to know that you are prepared for something to go wrong. With an emergency savings account in place, financial emergencies are no longer emergencies, they are just setbacks.
The past few weeks were a little crazy for us. First the dishwasher broke. And then the fridge broke. And then the dryer broke. And then the car broke. It wasn't fun dishing out all that cash in such a short amount of time, but because we had an emergency savings fund, we were fine. It wasn't an emergency, it was just an annoyance.
I want you to be prepared for your next financial shutdown. So put all your other financial goals on hold, and get crazy-serious about building up your emergency savings fund.
By the way, I have a friend who works for the federal government, and he is loving the shutdown. Why? It's extra time off, and he has plenty of money saved up for emergencies.