Retirement plans are common, and often prioritized above all else. You might know exactly what your future looks like in that regard, but what about those major life events that you don’t always see coming? Financial fitness or wellness is about so much more than just retirement. It’s about preparing to weather a storm that prevents you from earning an income entirely; or even forces you to dip into your retirement savings. And if you want to avoid that scenario, it’s time to move your emergency fund to the top of your to-do list.
What Does an Emergency Fund Prepare For?
An emergency fund should cover your basic bills and payments in the event that you suffer a job loss, critical illness or major injury, or provide you with the ability to take time off if mental health or other struggles require you to seek treatment or care for a loved one. For some, this figure might be higher or lower, depending on your monthly expenses, which is why it’s important to start by creating a budget that accurately outlines your necessities as well as those things you can live without.
Budget With a Buddy
Admittedly, budgeting isn’t the most exhilarating activity, but it can be easier when you’re not alone in it. If you share your expenses with someone, be sure to work together on your budget – if you do not share expenses with someone, ask a friend or loved one to help you budget and brainstorm ways you might be able to cut back in certain areas. Remember, an emergency fund shouldn’t be there to allow for a lavish lifestyle. It exists to support you through your unexpected life event, in a way that provides you some comfort, while also remaining as frugal as possible.
Ideally, your emergency fund should give you at least 3 months of basic living costs, but obviously, the more you are able to put away, the better.
I Am a Contract Worker / Temporary Employee – How Does That Change Things?
Being a contract/temporary worker, you want to be more prepared than most. In some cases, contractors will save and hold back a year’s salary, due to not having access to the benefits that full-time employees typically enjoy, such as severance packages or maternity/sick leave. Obviously, a year’s salary isn’t realistic for many, but if you can trim down some of your expenses, you may be able to put away more than you think.
When in Doubt, Refer to a Certified Financial Planner
CFPs are experts in their field, and work with a range of clients from all different financial backgrounds. If you’re ever unsure about where your finances sit, a CFP can help you to create and achieve realistic goals, give you more peace of mind, and protect your retirement savings.
Discussing finances can be mentally and emotionally draining, but it doesn’t have to be. Don’t be afraid to ask for help, give yourself grace and remember – just talking about future finances is a big step in the right direction.