One of the things we can count on in this life is that, sooner or later, something unexpected will happen. Emergencies are par for the course in this fallen and broken world. Just when things seem like they are going smoothly, out of nowhere comes a situation we might not be prepared to handle. But if we are basing our finance on God’s Word, then we will not only be prepared, but we will stay peaceful and joyful in the midst of the emergency. Listen to the Bible:
“The wise have wealth and luxury, but fools spend whatever they get.” Pr 21:20 NLT
God is a God of Wisdom. As His beloved, holy children, we are supposed to reflect Him and that wisdom. All this to say, we have to make good and godly decisions with all the gifts He has granted us, including our finances. Remember, we talked last week about how it all belongs to God anyway. We are blessed to be stewards who are supposed to manage these funds responsibly. It was when my own household was struggling to make ends meet, that God led me to Dave Ramsey and his seven step program called Financial Peace University. For the next several weeks, I will share some of what continues to help get, and keep, our finances under control. While we never put our confidence in any human, because we are all imperfect, this program is Biblically based, which is why I began following it many years ago, and the amount of peace we have experienced, just like the title says, has been amazing. Here are the Seven Baby Steps:
1- Start Emergency Fund with $1000
2- Become completely Debt Free, except a mortgage
3- Finish Emergency Fund with 3-6 months of expenses
4- Invest 15% of income for retirement
5- Start College Fund to help your children
6- Pay Off Mortgage
7- Build Net Worth & get radically Generous
Life is lived one step at a time, this includes our finances. I know we would all love to be in that final stage of the game, where we are set financially and can imitate God by helping others, yet there are many important lessons to learn along the way. So let’s exercise our patience and, as we progress towards being completely financially free, let’s follow each step, one at a time, and gain as much from the process as God would like. This week we will focus on Emergency Fund, that’s steps 1 and 3 above. I will explain why they are vital to have and maintain, so that we have less stress in our lives and are prepared for come what may.
God’s children should display God’s Wisdom. One of the things we can do to fulfill this is to have what is called an Emergency Fund. This just means we do not act like the fool in the verse above who sends every dollar they get. And sadly, in the current climate, too many not only spend what they make, but they spend over and above what they bring in. This is not only foolish, but it is an extremely stressful way to live! God is also the God of Peace, so this is certainly NOT what He desires for us. No, we must stay within our limits or risk anxiety and poverty. We will talk about making a plan to control our income and outcome next week, but I want to focus on one of the line items we must add to our monthly budgets and that is our Emergency Fund. This should be the first thing we do to get our finances under control. Why? Because emergencies happen! No human can predict life. Just look at this past year and a half! So while we can never be prepared for all things in life, with our finances, we certainly can be ready for some unexpected events.
We must start somewhere. If you are like 3/4 of Americans, you probably have some kind of debt. Getting rid of debt is one of the fastest ways to build wealth…but we will talk about that in a couple of weeks. For now, I want us to understand why we only start with $1000 in our Emergency Fund. Most common urgent situations will cost us about that much, so we will be prepared for something, should something happen. But the next focus is getting rid of that debilitating debt. So step one: put aside $1000 as quickly as you can. Then after our debt is completely wiped out in step two, we move on to fully funding this critical account. The rule is to build 3 to 6 months worth of our essential monthly expenses. The reason for this is because, if someone loses their employment, it seems to take an average of 3 to 6 months to find a new job. So if we put away that much money, we will be prepared and do not need to stress about the unexpected. We must place these funds into something safe and simple, no risky investments here, but more like a money market or saving account, because IF we need it, we need to have immediate access to all of it. Also, note I said 3 to 6 months of essential monthly expenses. That means the things that we must have to live, like our housing- either mortgage payments or rent- food, utilities and transportation. Remember we are talking about being in an emergency situation here, so you do not need to drink your fancy coffee when you are in this state. We are probably going to have to sacrifice some things we normally have, for instance, TV streaming subscriptions just might have to be put on hold or cancelled for a while. Now if you are able to put aside 3 to 6 months of your full budget, then have at it. But if things are tight, which is the case for the majority of families, then you are going to have to give up on some “luxuries” for the greater good. But fear not! This should only be a temporary situation. With God’s Grace, once the crisis is past and you get back to a normal income/outcome currency stream, you can always add these back…unless you’ve gotten used to life without them, of course. In that case, there are plenty of other good ways to make use of those funds.
Emergencies can look like many different situations. I talked about losing your job above, but thankfully before our current crisis anyway, this was not a common emergency. For many households, the real urgent needs are usually a smaller challenge. For example, if your car breaks down, and you need it to get to work, that repair would fall in the emergency category. Whereas a really good sale on those shoes you have been looking at, is NOT an emergency! Sorry. So we understand each other, I am talking about funds you put away, in a different account preferably, where you will not touch it unless there is a legitimate calamity happening. Again, this can make our lives so much more peaceful, knowing that if, God forbid, some true tragedy does happen, the last thing we have to be concerned about is keeping a roof over our head, foods in our bellies, the lights on and getting out to work, or to look for work. Simple things like this, helps us gain control over what can seem like a very uncontrollable part of normal living.
Don’t be afraid of using this money if you are really in a catastrophe. As I helped others learn these Seven Baby Steps, what I found is that some did not want to touch this important account, even if they were really struggling. Here is how this should work; let’s say you finished step one and put away that first $1000, and have moved on to step two, getting rid of that personal debt…but then you get a flat tire! No worries because you are prepared. Pay for the new tires out of your Emergency Fund, stop paying down the debt temporarily, going back to step one as you build up that Emergency Fund back to its $1000 mark, then after go back to step two. This way you are not using that credit card for emergencies! That is never a good idea. Using your Visa to pay for a crisis shows that you are living in crisis mode. Pay for the tires, build that fund back to $1000, then continue down the baby steps. If we follow this plan, step by step, then we will not only be financially sound, but we will have more peace in our lives too.
Jesus saves…and so should we! So do yourselves a favor and start socking away any “extra” money you come by into your Emergency Fund. What extra money, you say? Whatever you come by. I would say way too many of us have all sort of things in our homes that we really do not need…and may no longer even want…so sell it all! In that way, you can raise the needed cash for this Emergency Fund. Are you down to the bare bones on your possessions already? Well, how about getting a temporary second job and stash away this cash? Between DoorDash and babysitting, having a side hustle is becoming more and more accessible. Remember, this only needs to be a temporary thing. Once your Emergency Fund is fully funded, it can be time to retire from that extra job…or not, that’s, of course, up to you. The more we grow in Christ, the more we will want to be responsible with every gift He gives us, and finances are definitely something God wants to use to help us imitate Him more and more. I love what Mr Ramsey says, money is amoral. It is neither good nor bad. Like a brick, we can use it to smash someone’s window or to build a hospital for the needy. It is what we choose to DO with our finances that makes it good or bad. The more reliable we are with this gift, the more abundant our life gets. That’s been my experience, want it? Then won’t you join me?
Until we meet again, keep lifting your eyes to God, He’s closer than you think.
<>< Peace, Diane