Posts Tagged ‘emergency fund’

Drill Baby, Drill: For Financial Disaster!

Tuesday, February 15th, 2011

Job Security

{I wrote this post before Cook County, in Illinois announced layoffs of up to 100 nurses! Please get your financial house in order!}

Jo Ann BSN wondered why the DON (Director of Nursing for you civilians) had asked her to drop by her office.  It was a little unusual, but not unheard of.

She was, after all, a senior nurse in peer review. Good Samaritan Hospital had recently been through their state survey, a grueling experience.  But they had gotten adequate, and in a few areas, superior reviews in Jo Ann’s areas of focus.

“Maybe I will be getting a raise!” she laughed to herself.   Silently acknowledging the several million  bucks the facility  lost last year, and knowing it would be awhile before any raises were coming  her way…

As she sat down across from the DON, Jo Ann felt sick! The DON looked just like her cat had died.  (Jo Ann knew, as did everyone who had been in this office and seen all the stupid silly pictures, how much this boss loved her cat!)

“JoAnn, I am so sorry, but we are cutting back on administrative staff as part of our financial restructuring, and your position was eliminated!”

“But,but, but”….JoAnn stammered.  “I have been here almost 20 years…. I have two children in college and a car payment, what am I going to do?  Nobody around here is hiring right now.  And you know my youngest has Cystic Fibrosis.  His meds are outrageous…What will we do?”

“I wish I could help you.  I really am sorry.  I hope you have a little money saved.  And you know there is Cobra for your insurance.  And we will be giving you 4 weeks severance.  I fought for you-they wanted it to be the 2 week minimum.”

Job Losses and Health Care

Job losses in health care were the lowest of any profession during this most recent severe economic downturn.  But for the medical arena,  I think the worst is yet to come.  With the severe budget deficits on the horizon, and the recent Health Care Act, cuts in reimbursement to hospitals and providers are coming. And those who want  success must prepare now.  Don’t wait till you are the next “JoAnn!”

Planning for Disaster-Before It Happens

A great American and personal finance blogger, (does that make him a great American personal finance blogger???)-anyway Len Penzo wrote a great article recently about an exercise he and his wife did, which I call “Financial Disaster Planning 101″ (his title was different but I like mine better…) Please check out Len P’s article, but  let me review: They, separately just for fun, did an analysis of potential family spending cuts if Len, the family breadwinner, lost his job. What could go, what would stay! Their monthly spending cuts:

  • cable TV
  • newspapers, magazines, and books
  • entertainment spending
  • Restaurant meals.
  • Housekeeper
  • Vet bills

They found, even with cutting  monthly spending by 50% or more, their monthly bills would remain way over the amount he would be getting from unemployment. However, because of careful planning, they have enough in savings (rainy day fund) to supplement this short fall for many months. He and his family have a margin-a cushion for when stuff happens. They won’t have to make difficult choices of going without health insurance, moving to a smaller home, or eating cat food. They have lived within their means, avoided living month to month and built up a cushion for emergencies.

Drill Baby, Drill!

Medical Drill

In medicine we do drills!  We have tornado drills, fire drills, Code Red, Blue, and Orange drills.  In Ob we do shoulder dystocia and post-partum hemorrhage drills. These are done because they work! They  eliminate the “deer in the headlights” look that is common in rookies’ eyes when facing life and death scenarios. Jo Ann, in the story above, sadly didn’t have a cushion.  Her family had to make difficult sacrifices.  Their college kids were going to be on their own, all of a sudden.  They couldn’t afford COBRA. That meant signing up for Medicaid to get their youngest’s medicines until they could get back on their feet. And because nobody was hiring in her region, they were going to have to consider moving-but oops the house is upside down…..

The moral of the story

Plan for the worse.  At least consider the possibilities.  Job loss, divorce, illness, and accidents are so common, and are also the most common causes of bankruptcy.  Begin the process of getting control of your spending. Have a financial disaster drill and see what it tells about you!

Reader Comments:

What are your thoughts, have you a contingency plan for the unexpected financial emergency? Photo credit: US Navy c.c.

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Posted in goal setting, Planned spending aka budget | No Comments »

Your Emergency Fund-Let’s Fine Tune That Baby!!!

Thursday, April 29th, 2010

Emergency Fund

What is an emergency fund?

Emergency funds are savings accounts, built up for dealing with life’s surprises.  Some may call it a “just in case” fund.

  • Just in case the transmission blows.
  • Just in case the air conditioner condenser dies-(ask my nursing assistant what she thinks about this????)
  • Just in case your softball nut breaks her leg sliding into second!
  • Just in case you or your spouse get laid off…..

As a recent post suggested, your emergency fund gives you margin. A little space between a stressful day vs a financial disaster for you and your family.

So the usual guidance is to decide how much you would need to get by for  3-6 months without a paycheck.  This is so important, it was one of the first thing I posted about when I started blogging, “yeeearrs and yeeaars ago!!! (seems like it….)

I wanted,  today, to talk about emergency funds in a little more detail. To “dissect it”,  perform an “autopsy” or as we say in the Operating Room-let’s fine tune this baby-(well, we don’t normally say that, but maybe I will tomorrow, and see what happens!!!!

So, Let’s Fine Tune This Baby!

First, let’s see what the standard recommendations are:

  1. You are in debt up to your ………-You need just enough money in your emergency fund  to handle the most basic of emergencies.   $1,000 bucks seems to be the standard here.  The thinking is to pour your extra income against debt, then build up a larger, long-term emergency fund.
  2. You have a little/no debt, and a stable work situation-3 months expenses might be enough.
  3. You have little to no debt, but you work contract, or commission and your income is up and down-6 months to even a year is better to help you handle those unknowns.

Now for the fine tuning:

  • If you or your spouse are paralyzed by idea of only having a 1,000 bucks in savings while you are blasting away at those credit cards-bump that balance up until you both can sleep.  Having extra  money in the bank, can help your REM sleep, I promise…..
  • If you know a life event is right around the corner-maybe a baby due this year- then quit  your debt reduction temporarily,  and pile up the cash until you know  the ending of the movie-(healthy baby, and mom, and no surprise medical expenses!)
  • If you have no debt, but feel better having a huge pile of money in your emergency fund?  Then think about putting half in a money market account for easy access, and the other half in CD’s or a short-term bond fund that will pay you a little interest. (remember the post about inflation….)  If you have to grab that money, there may be a small penalty, but odds are in your favor that it will grow undisturbed.
  • Make your deposits to your emergency fund automatic, so you don’t have to think about it.
  • Make sure your money-market account is as high yielding as possible.
  • Remember, you are saving for bare bones expenses, not necessarily 6 months of your total paycheck!

A Carnival of Emergency Fund Stories

Emergency savings accounts are so strongly recommended by all the experts, there is no limit to the amount of info you can find, about the why, how, and mistakes in emergency fund management.  Here are several posts from other personal finance bloggers, to give you different takes/opinions on this subject.  Check ‘em out.

Tips on how to save up/add to, your emergency savings:

Free From Broke has these thoughts about emergency savings.

From Consumerism Commentary:  50 tips to help you build your fund-50 tips-no more excuses!!!!

Not Made of Money has these tips for funding an emergency account. Tips, tips and more tips!!!

Emergency Fund Investing Options discussed:

Cool to be Frugal, has this controversial subject, putting part of your emergency fund in a Roth IRA.

Redeeming Riches, talks about your savings safety net, with suggestions for CD Laddering-a way to maximize CD returns.

Personal Finance, By the Book, discusses the use of the emergency fund, to partially self-insure, therefore saving money on your  insurance costs-I love the idea of a high deductible health policy/tied with an HSA-makes a lot of sense….

Real world usage of the emergency Fund!

Well Healed Blog has a real world story, about her use of her “Freedom Fund”

Christian Common Sense saved his honeymoon, (and maybe his marriage) with his emergency fund!

And last but not least:

Budgeting In The Fun Stuff, has this take on Emergency Money

Learn Save Invest writes this about the Emergency Fund!

And Tom at Canadian Finance Blog, has this advice from the far north on your emergency savings!

SUMMARY:

Now, if you can’t get all you need to know about Emergency Funds, in this article, then you just don’t want to do it!!!

Don’t put it off another minute- make the call, visit the bank, or  get online  to get your emergency fund started.  And when it starts to build, return to the ideas above, to:

FINE TUNE THAT BABY!!!!

Let’s hear your thoughts on Emergency Funds-Do you have one, how big is it, have you ever used it???  Let me  know!!

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Posted in Personal Finance 101 | 11 Comments »

Homeowner’s Insurance-What do Millionaire Nurses Do?

Monday, February 15th, 2010

Homeowner’s insurance is one of those boring things you deal with in life-you would rather be grilling out, or taking a long hot bath, than thinking about insurance.

But, if something happens to your home, such as a fire, severe leak, or burglary- then you will be extremely glad you have it.  And if you rent, keep reading for advice for you too!

What exactly is homeowner’s insurance-it is an insurance policy that will help you re-build, repair, or replace your home, or the items in it, if something happens to it.

What are a few precautions to take with purchasing homeowner’s insurance:

  • Choose a high deductible, and make sure you have a super-duper emergency fund!
  • Make sure you get replacement value on home and contents, otherwise, the depreciation (loss of value over time) of your stuff, will result in your getting insufficient money to replace what you lost.
  • Make sure you comparison shop, and try to bundle it with other insurance for additional savings.
  • Remember, homeowners insurance, does not cover damage from flooding, and frequently wind damage.  So make sure you find out those details, and make other insurance arrangements to cover those areas.
  • Use a video camera to video your home and contents-make sure you itemize things that you think are valuable, like guns, jewelry or art.  And put that video somewhere besides your home- in a bank safe-deposit box, or with a relative-it will not help, if the video gets burned up in the fire…..

Insurance companies have been much more aggressive at raising rates, and canceling policies on folks who have claims or losses.  So keep your emergency fund intact, and use that instead of filing an insurance claim for small losses.  Save your insurance for the “heart attack, not your cold or flu!”  It may not be fair, but that is the way it is……

And just like in our discussion on life insurance, make sure the companies you choose are quality companies, who will be there when you need them.

Your Home is Your Castle! Photo by kansas explorer

Now what about people who rent-they aren’t homeowners.  Well, they may not be homeowners, but they do have stuff-so make sure you carry what is called “contents” coverage.  This covers your furniture, and other household goods.  Again, if you have anything valuable, that may be difficult to replace have it itemized on your policy-the company may require an appraisal, to make sure the value you quote is accurate.

If you have any questions or comments, please let us know.  If you have had any experiences with your homeowner’s insurance-give us a shout.

And remember, you can join us on our journey to helping others become “Millionaire Nurses”, by joining our team.  We will send you the E-book, “Emergency Money Resuscitation” as well as an emailed “mini-course” on money management.   These two items are full of money saving tips-that will help you save hundreds if not thousands.  I will also send you our newsletter,”The Millionaire Nurse Money Letter”

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Economics 101 for Millionaire Nurses!

Sunday, January 24th, 2010

Economics, just the word scares a lot of folks.  They start thinking of pointy headed nerds, with pocket protectors, and slide rules- using big words to tell people how bad things are out in the real world-like we didn’t already know…..

I found this definition of economics online:  “The social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems.”

Just the definition puts most people asleep.  What I found a little surprising, was that economics is a social science.  When I think of social science- I usually think psychologists, social workers, and anthropology.

I thought economics was “mathematical”.  Most social scientists that I know, would run from a calculator-so I learned something today….

One of my ways that I give back to society (one of the most important tenet’s of “Millionaire Nurses” -giving back) is serving on our city council-yes, I am a politician!!!!  You might think I do it for the money, but the 300 bucks a month that I get paid, doesn’t go far when I miss at least 10-15 business days a year from my medical practice.  ( I need to learn more about  “economics” myself.)

Now I am not telling you this to pat myself on the back. I consider it a privilege to serve my community- that has provided a great living for my family  for the last twenty-five years.  I also have learned a lot, by going to seminars, and educational opportunities to help become a better councilperson.

Today, I had the opportunity to hear a round-table discussion about the current economic downturn, to help cities manage their budgets. To assist us in providing the services citizens expect from city government, with the severe downturn in revenue from the drop in sales tax revenue, and other fee’s that normally support local government.

The featured speaker, was Dr Jeffery  Dorfman, Professor of Economics at the University of Georgia.

I am happy to tell you, he was neither pointy-headed, nor boring, and certainly didn’t sound like a nerd.  He gave a great presentation on the current economic situation facing our country, and by extension our state and city governments.

My “take home” points from his presentation were:

  • The recession is now over, but until consumer confidence returns, it may not be obvious to you or I.
  • When you are out of work-it doesn’t really matter whether we are in a recession-the household affected is in their own version of a “depression”!
  • This recession, while severe, is comparable to recessions in the sixties and early 80′s, though it will probably take longer to recover, than those past recessions for various reasons.
  • City and State politicians should plan their spending based on conservative estimates of revenue, using the good times to put money in  reserves, so when times are bad, they have a cushion.  This, to prevent having to curtail services, fire people,  or raise taxes-when it is the most harmful for the citizens, who are already struggling.

Now how does that relate to “Millionaire Nurses”?  Obviously, a lot, or I wouldn’t be writing this long post!

This is exactly what I am trying to stress to my readers.  The huge benefits you and your family will have , when you put aside money in the good times-(also known as the “Super-duper emergency fund”).  Limiting your spending to less than you earn, and limiting your borrowing so that you can continue to prosper when times are bad.  Millionaire Nurses are not struggling because of  living beyond their means.

So thanks, Dr Dorfman for an enlightening presentation-the Georgia “Dawgs” are lucky to have you.

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Posted in debt reduction, personal finance | 3 Comments »