TWS||WalletWisdom||With Wahome Ngari
Funding this account requires
that it be made the number one financial goal with the aim of putting in up to
10% of your net income into the fund but you can only start with what you can
afford for now.
It is much easier to convert an
existing bank account as the pot for the fund, keep adding to it until it is
fully funded (equivalent to six months expenses). The mantra for success in
this important agenda is: Aim big, start
small, start now.
Automating the cash deposits to
your emergencies’ safety net account through a salary deduction at source or a
standing order at the source bank will increase your chances for success in growing the emergencies fund.
The money has to be kept in a safe place where the principal amount is not at risk (buying shares is not one of the options) and the owner cannot succumb to impulse withdrawals (the mattress and the sugar bowl are not candidate holdings).
The money has to be kept in a safe place where the principal amount is not at risk (buying shares is not one of the options) and the owner cannot succumb to impulse withdrawals (the mattress and the sugar bowl are not candidate holdings).
Emergencies
give no notice, they last for a lifetime
Since emergencies do not give a
thirty days’ notice, the money in your safety net must be easily available
without borrowing (the Sacco is ruled out) or making arrangements. If you think
about it you realise that, a portion of the money has to be available
immediately (now) and the other portion within 72 hours so as to address
emergencies.
Since you will have this fund
for many years (uncertainties last a lifetime) then it is important to consider
the effect of inflation and bank charges which will wear out the fund. The fund
will only exist if we are good stewards who help it to grow by always refunding
what we take out.
With considerations of safety,
growth and availability it is now clear that your fund will have to reside in
three distinct pots: a savings account,
a fixed deposit account and a money market unit trust.
Why
manage uncertainties?
You must have heard people say, they
would cross a bridge once they get there… when it gets to emergencies or uncertainties the bridge has to be crossed there and then.
Your emergency fund (Safety net)
is not for making you wealthy, but
it is a wedge to ensure you do not backslide financially, it is a family love
bank where you will put in deposits of care and that is why you will let those
close to you know the existence of the fund and you will share the PIN of the
ATM card because the emergency the family might face is your state of being
unable to talk (think of being unconscious and requiring urgent medical
attention).
There is no doubt the existence
of this fund will give you a sense of calm, allow you to relax, think clearly
and sleep well at night so that when the day breaks you will be in a position
to do your best having managed your uncertainties.
Setting such a fund will require
a mind shift which allows you to conceive a self- insurance mechanism which
will eliminate budget interruptions and give you a chance to specifically
define your emergencies.
You can now focus on setting up
the fund by selling your crap (things
you do not use) and putting the money in the fund. Do the same with any
windfall that comes your way.
If you need more help, ask us
about the Wealth Creation Masterclass where such concepts are taught.
Wahome Ngari is the Principal Consultant/ CEO, Citadel Consulting Ltd. He runs the personal finance management program known as Wealth Creation Masterclass . Get in touch with him on 0724 888219 or drop him an email at wahomengari@citadel-africa.co.keFollow us on Twitter @WCmasterclass, on Facebook, listen to our podcasts, or watch Wealth Creation Master Class testimonies. Sharing is a sign of caring... share our content with your relatives and friends.
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