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Are You Doing Well Financially?
How many times have you heard “I’m doing good” specifically for those working in the network marketing industry I’m sure can testify that they have heard it time and time again?
What does it actually mean to be “doing good”? Statistically, 99% of the United States population has less than $500 in the bank. That to me is not “doing good.” Especially with inflation rates continuing to rise that $500 covers less and less. So, what happens to these individuals who are “doing good” and something happens, a disaster hits. Inevitably something always happens on the small scale it could be the refrigerator breaks and you must replace it but what if a breadwinner is hospitalized and then unable to work for a month, will you still be able to survive? Even if you have disability policies in place typically there is a 30-day waiting period so you still need to be able to cover expenses from that time.
Here is what “doing good” or being financially stable means to me
#1 Having a Well Funded Contingency Account
Some refer to this as an emergency fund but I recently learned/was brought to my attention that calling it an emergency fund would attract emergencies to come to me. Bare minimum this fund needs to have $1,000. What I try to maintain is a fund of $5,000.
What this fund can be used for is if your refrigerator breaks, your car breaks down unexpectedly. This should not be used for regular maintenance i.e. breaks, new tires, registration etc. I will address where I fund those in a minute. This fund is also not for a last minute vacation, as tempting as it sounds that is not what this is for!
#2 3-6 Months Expenses
This is a separate amount! I choose to keep mine is separate savings accounts but you can choose to combine them as long as you realize they are 2 separate funds. We personally ran into a situation in the fall of 2017 where this fund came into play and not having the full 6 months saved caused a problem.
First, you’ll need to come up with a figure for 1 month’s expenses so gather real numbers look at your bank statement if needed but preferably you should be tracking this already (see my Money Saving Tips where I address that here). Once you have that figure, start somewhere! Your first goal should be one month’s savings when you achieve that do something small to celebrate you’re already above average! After that keep saving until you have 6 months living expenses set aside. You’ll be amazed how much better you’ll sleep at night knowing IF something happens you’ll be set and able to recover.
#3 Annual Expenses
This is where those pesky things like tires, brakes, oil changes, car registration go. Now how you separate and save for this is up to you, I’ll show you the two most popular ways.
- First option – You can have just one giant fund where you combine all these annual expenses across the board from your medical, car, insurance, taxes etc. When one of these expenses comes up just pay for it out if this fund.
- Secondly – You can separate by type. So, you’ll have a car annual expenses fund, a medical annual expenses fund etc. When a car expense comes up you take from your car annual expense fund and etc.
#4 Becoming Debt Free
At a minimum eliminating all consumer debt (everything outside your mortgage) but we’ll have to save this explanation for another day.
Once you have these savings funded and your debt eliminated then I would be comfortable saying that “I’m doing pretty good” I’m sure that some are probably thinking this isn’t possible no one can achieve this, that’s what I have credit cards for etc. However, I’d encourage you to push past your limiting beliefs and think just for a minute what would it be like having that security? How much better would you sleep at night? It will take effort no one is denying that and you’ll start slowly but your efforts will compound over time and you will hit your goals if you persevere. Half of success is just trying consistently!
YOUR ACTION STEP FOR TODAY – Determine if YOU think you are truly “doing good” if you are then great keep doing what you are doing! If not then I want you to decide today what you are going to change to start to work towards this and then let me know what you are going to do! I would love for you to connect with me on social media. I want to hear what you are working on and if this has helped you.
