Here on Day One of Military Saves Week 2013, the topic is saving for emergencies or forgotten expenses. I prefer to call them forgotten expenses, because 95% of "emergency fund" spending is for things that are not truly emergencies. By my definition, an emergency is something that is unforseeable and unpreventable. A lot of things that people call emergencies are actually a failure to plan, or just being dumb. For example, the Military Saves website lists these emergencies:
• repairing the brakes on your car; • buying your child a new pair of needed shoes; • replacing a broken window in your house; • paying for a parking ticket; or • flying to visit a sick parent.
I would argue that brake repairs and new shoes are things that you can absolutely anticipate; therefore, they are not emergencies. Replacing a broken window might be an emergency, but you know that houses need repairs, right? Parking tickets fall into my "I screwed up" category, which isn't really an emergency because it was preventable. Flying to visit a sick parent is an emergency, but it is still something that you should be thinking about when you get stationed far away from home. In my opinion, emergencies are things like serious, large medical bills not covered by insurance, or job loss, or your house catching fire.
But this isn't really what I'm supposed to be writing about. I'm supposed to be encouraging you to save, for emergencies or forgotten expenses, or other situations.
I absolutely agree that savings is a cornerstone of keeping financial secure and staying out of debt. Having $10,000, $1,000, or even $100 set aside for surprises is much, much better than having nothing set aside for emergencies. When I worked with one of the military relief societies, nearly all our customers were requesting assistance of less than $2,500. If they had $2.500 in savings, they wouldn't be needing to borrow money for an unanticipated car repair, or a trip home to see an ailing grandparent.
Many people feel that their budget is stretched to its limit, and there is no way that they can save any money. I say that you have to find a way. It might not be easy, but it is the essential first step in financial stability. Thankfully, even the tightest of budgets can usually be squeezed just a little bit more, especially if it is only for a short time. The Military Saves website has some good ideas, and here are some of my own thoughts.
- Give up something bad for you. Cigarettes, soda, alcohol, dip, fast food. Most of us have some vice, and vices are expensive. I gave up soda in December, and I estimate I'm saving at least $30 a month. Plus, it is good for me!
- Think about what you could do differently for just one month, or what you could skip once. Could you skip ordering pizza for a month? Could you skip your weekly movie night just once? Could you not get a manicure for a month? The idea isn't that you need to deprive yourself forever, just for a little while. Done well, you can use this money to get ahead and then you'll be in a much better position in the future. If you could save just $20 per week, you'd have a $1,000 emergency fund at this time next year.
- Save any surprise money that you receive, such as unusual overtime pay, or a distribution from your USAA subscriber savings account, or whatever other money comes your way.
- Avoid unplanned spending. This is a hard one for me. I am always sure that I'll never find such a great product at such a great price. As a result, I buy things that we ultimately don't need. See if you can give yourself a 24 or 48 hour cooling off period before you make any purchases.