by Trent Grinkmeyer
According to NBCNews.com, 63% of Americans can’t cover a $500 emergency. WOW! When I read about the lack of cash reserves for the average American household my mind went “BOOM”!
Now that we know about this common problem, let’s build a solution. As a Financial/Life Advisor, one of the first things I ask a client is, “If the AC Unit dies, how are you paying for it to get fixed?” Typically, the answer is “Credit Card”; not a good alternative. At an average of 22% interest rate, an AC Unit fix will dig you deep into a black hole of debt. No matter your financial situation, you can build a cash reserve to cover that unexpected expense.
“But I live paycheck to paycheck. No way I can save for a cash reserve.”
I don’t believe that. Anything is possible if you focus and don’t take NO as an answer. Surround yourself with YES people and it WILL happen! It may take a lot of work on your part, but you can do it.
How much should I save?
I recommend three months’ worth of income. Most people can’t just peel off three months’ worth of income and set it aside. So we have to build our reserve day by day, week by week, month by month.
- Step 1: Get a Jar. Yes, a jar with a lid. This is very important to have. No Joke! Jar + Lid = Cash Reserve.
- Step 2: On the jar write “Cash reserve. BACK OFF!!!” Place this jar by your kitchen sink or where you place your wallet or purse.
- Step 3: Every night put some money in it. A penny, a dime…a million dollars, whatever amount, put some money in it and then forget about it.
- Step 4: On pay day put a portion of your check in the jar. The way to figure this is to take the three months of income and divide it by the number of paychecks you want to save for your cash reserve.
- Example: Income: $24,000 a year
- Amount to save: $6,000
- Amount per check: $125.00
- Number of paychecks to achieve goal: 48
If the amount is too much, increase the number of paychecks or sell something. That’s right, sell something. Garage sale + Ebay or Craigslist = Cash money. Become a garage sale pro. Buy something you can resell at a profit. God Bless Capitalism!
LAST STEP: Have someone you are accountable to. This is crucial! What most people don’t realize is that being poor or cash poor is an addiction. Once you are in that position, you justify why it’s OK to stay there. The only way out is to get help; find someone who will call you out when you give in. Get an accountability pal.
A cash reserve is the first step to Financial Wellness. No question! So check your pride at the door and get to work. Being financially fit is not easy. No one said being above the average would be easy.
AIF®, CRPC® / Financial Consultant
205.266.7509
trent@grinkmeyerleonard.com
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Trent Grinkmeyer, Valerie Leonard, Jamie Kertis and Caleb Bagwell are Registered Representatives and Investment Adviser Representatives with/and offer securities and advisory services through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through Grinkmeyer Leonard Financial, Grinkmeyer Leonard Benefits Group, or CES Insurance Agency. Grinkmeyer Leonard Benefits Group and their leadership consulting services are separate and unrelated to Commonwealth. This communication is not intended to replace the advice of a qualified tax advisor or attorney.
Author: SWal Life
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