Happy New Year 2018!
January’s blog post theme
During the month of January, I’m going to be thinking about money, as we have set some specific financial goals for our family in 2018.
It follows that my blog posts may follow a bit of a financial theme in this first month of the new year.
In particular, I’ve been listening to Dave Ramsey’s podcast over the holidays. Ramsey’s consistent, straight-talking and sound advice has benefited thousands of people worldwide and his simple series of Baby Steps has helped his readers, listeners and YouTube watchers get a grip on their finances and – in Ramsey’s words – “Change their family tree.”
The Baby Steps help break down Ramsey’s plan into manageable chunks and build momentum. Indeed, the small wins that can be achieved early on in the programme through these Baby Steps help psychologically with motivation.
Baby Step 1
The very first of the Baby Steps is to start an emergency fund of $1000 (or, in the case of us Brits, £1000).
This should be done as fast as you can.
If you’re already a seasoned declutterer, you may find this easier than you think. A good rummage through your garage, wardrobe or loft may yield some excess stuff you no longer need, so you may soon be able to pull together the funds to get started.
If, like me, you’ve already learned to let go of stuff, freeing up unwanted items to contribute to this initial £1k may not be too much of a challenge. It may take only the effort of cleaning them up, photographing them, then listing them online on sites such as ‘Things for Sale in Kenilworth’ (our local community site on Facebook) or eBay.
Why Baby Step 1?
Ramsey’s approach is to establish this beginner’s emergency fund so that if you have a genuine and unforeseen expense, you won’t have to go into debt to pay for it. In a later Baby Step (#3), a fully-funded emergency fund of 3-6 months worth of expenses is put in place, but this starter fund is where we begin.
When you need an emergency fund
Between Christmas and New Year, we had a sudden and unwelcome fall of slushy, grey snow. We came down for breakfast the morning after Boxing Day and noticed something was odd about the hedge that usually sits against the wall by the side of our kitchen window. The supports to the hedge had given way in the wind and snow, so the prickly shrub had lowered itself forward over the border, covering all of the smaller plants and herbaceous perennials beneath.
Thankfully, with some significant effort (and 6 hours’ commitment), my lovely husband managed to shore up the woody stems, drill new supports into the wall, and push the hedge back into place.
However, this unexpected job reminded me that we weren’t quite as lucky when the fence blew down.
When the fence blew down
On the other side of the garden, we share a boundary with our next door neighbours.
One very stormy night two or three years ago, our shared fence decided it was no longer fit for purpose, leading to an unexpected but essential replacement. This cost about £375 per family, which our emergency fund was able to cover easily.
The point of this is that, whilst you’re taking steps to get your finances into good shape, the last thing you need is a mini-emergency to set you back.
In 2016, research by the charity Shelter found that 37% of working families in England could not cover housing costs for more than a month in event of job loss. Ramsey’s approach is designed to mitigate against this and putting an emergency fund in place is a first step in the right direction.
Do you have your emergency fund in place?
If you haven’t done so already, I’d encourage you to get your emergency fund in place.
So, when the metaphorical fence blows down, you’ll have the financial resources to deal with it. Plus, there’ll be no call on your emotional reserves either, as you won’t be stressed about how you’re going to pay for it.
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