An emergency is going to happen.  There’s simply no way around it.  How it affects you when it does will determine whether or not you’re in a glass half full, or a glass half empty state of mind.  Murphy seems to hit us when we least expect it, but what’s interesting to me is that we tend to only blame Murphy when we aren’t prepared, since we seek to shift blame to someone else when unexpected things happen to us.

Step 1.  Stop blaming other things.  You are the sum total of the decisions you’ve made up until this point.  If you don’t have an emergency fund, it means one of two things.  Either you have no income, or you’ve built a life around spending all of your money on things that make you comfortable for the moment.

So it becomes a fruitless venture to teach people how to invest their money in long term investments when they a) have no emergency fund, and b) are in debt up to their eyeballs.

(Note: that makes me think of the definition of the word investment.  Investments go up in value over time.)

Dave Ramsey gave a great example of how diligent we are to prepare when we see a threat to our well-being hit close to home with his example of the attacking bear.  If a bear were to attack your neighbor, and then another neighbor, and another, you and your family would do everything within your power to ensure that you were protected from being attacked by a bear.  You would, in fact, stop all activity and go on red alert to ensure this would be taken care of.

Consider this when you think about your emergency fund.  You MUST have an emergency fund and it needs to be sufficient enough to handle life’s tough stuff.  So how much is enough?  Well, that depends on your income structure.  Before you can determine how much you need to have, you have to add up your monthly expenses.  Once you have that number, you can decide which multiplier to use.  For example, if you’re self employed, you probably want to have enough savings to cover your butt for 6 months.  So let’s say your monthly expenses were $2000.00.  That means you need $12,000 to cover life’s emergencies.

Yeah, $12,000.00.  “You must be crazy.”  The truth is, most people in this country don’t have $1,000 in their bank accounts because they spend everything they make, and when they have an emergency, they dig themselves into credit card debt or damage close relationships with personal loans from family and friends.

If you’ve structured your life such that you don’t have enough socked away to handle life’s emergencies, then you need to re-examine how you live, because those emergencies will continue to keep you under the thumb of this country’s financial institutions, enslaved by lenders, and forever stuck in the rat race.

But there’s another thing to consider.  Most of your emergencies aren’t going to cost you more than $1000.00.  A deductible, a flat tire, a water heater, etc.  So, your first challenge is to simply put $1000.00 away in an account that’s easy to get to without penalty, quickly, and then never touch it until you actually have an emergency.  You also need to come to terms with what’s an actual emergency, as there are plenty of things you may believe to be an emergency that you can live without.  A great bargain is not an emergency.  In fact, saying no to a great bargain that you cannot afford because it will drain your emergency fund is a great exercise in discipline and self-control.  Let it go.

Also, consider this.  If you’re in debt, go for your $1000.00 first.  Then, stop building your emergency fund and pour every ounce of your energy into knocking off your debts.  Trying to save 6 months of funds for an emergency while you’re paying off debt doesn’t make much sense.  It is swimming upstream against a relentless current filled with debris that will make the slightest hiccup feel like a full on assault from Murphy.

Murphy will always come around, but when you have an emergency fund, he goes unnoticed because you have the tools to manage him when he arrives.