OK, OK. First blog post. Have to come with it. People have to read this and be hooked or else this goes from blog to Dear Diary in a hot minute. So what's on everyone's minds these days?
Well, like everything else you're reading now, I'll fall into the COVID-19 trap. While there are dozens of topics I could cover on how the pandemic impacts you financially, let me start with the concept of emergency savings.
Emergency savings are a fixed amount of money you set aside for unforeseen circumstances. Most recommend saving 3-6 months of expenses to help you get by in tough times (i.e. right now for some of you). Rent/mortgage, food, daycare, insurance, car loans, etc. are some of the big items. If you can't live without Netflix, throw that in there too! It never hurts to save a little extra.
With your essential expenses in mind, how many months of savings are right for you? Let's say you're laid off from a job. How soon can you find a new job? Some specialized positions take months to secure, or may even require relocating, which means you should pad your emergency savings accordingly. Will your new job pay the same? Less? More (cha-ching!)? Factor the potential for changes in pay accordingly. Are you supporting a spouse and/or children? May want to up your savings if you are a sole provider. There are other scenarios you could encounter (birth of a new child, divorce, taking care of an elderly parent) that will require you to think through how your finances would be impacted.
You may be saying this is all great, but isn't this too little, too late? NOPE! If you have some income, it is never too late to save. Many unemployed are getting additional unemployment benefits courtesy of Uncle Sam. If you can minimize your spending to bare essentials for a period of time and build up an emergency fund, why not start now? Ditch DoorDash for a few months and get groceries delivered instead and learn to cook! Stop going through Starbucks drive-thru every day - or at least cut back to once a week - and brew coffee at home. Conserve a little now until you're financially stable again and have built up sufficient emergency savings. Short term pain, long term gain!
Finally, where do you keep this money? Well, the stock market is way too volatile, especially now, and buried in your backyard takes too much sweat equity! A happy medium is a high-yield savings account. I don't have one specific bank to endorse (because none have offered to pay me to do so), but there are several online institutions that will give you a decent interest rate (~1.5 - 2% right now) with a low minimum deposit. This will also give you nearly-immediate access to your money if you need it.
Thinking of everyone going through difficult financial times right now and wishing you the best. Thank you for reading!
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