Commentary - Emergency fund: Plan for the next "big one"

News > Commentary - Emergency fund: Plan for the next "big one"

Emergency fund: Plan for the next "big one"

Posted 4/20/2011

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Commentary by James E. McDaniel
65th Force Support Squadron

4/20/2011 - LAJES FIELD, Azores (AFNS) -- The recent prospect of a federal government "shutdown" provided a wake-up call that all Airmen must have an emergency fund.

How many of us were really ready for "no pay" or "reduced pay" on April 15, 2011?

The scenario of a "no pay due" caused widespread alarm, and many started asking, "How am I going to pay my rent, car payment, childcare, insurance or necessities like food?"

The possible shutdown of the government presented us with a great learning opportunity and real motivation to start saving for an emergency fund.

How much is enough for an emergency fund? How do you ever save enough to have an emergency fund?

These are questions that can be answered objectively, but each Airman and family must take action to build their own emergency fund today by consciously making decisions and choices not to spend all their income every month. We know that all of us will experience emergencies throughout our lives. Today is the best time to start taking steps to build your savings for the next emergency.

What is an emergency fund? Plan for the worst and hope for the best! Before this event, many Airmen and civilian federal service workers felt that having enough money to fly home would be sufficient for an emergency fund. Most of us would not have thought the worst could be "no pay due" for an undetermined time.

Being able to financially survive without pay for three to eight months should be your new planning figure. Most financial advisers say Americans need at least three months of living expenses in a liquid form, such as a savings or checking account, to pay for emergencies. How many months could you survive from your checking or savings accounts without going into debt or borrowing from your retirement account?

How much is enough? You need to figure out how much it is costing you to live each month. Keep track of your spending for at least 30 days. Multiply this amount by three months. How much is enough? You need to figure out how much it is costing you to live each month. Keep track of your spending for at least 30 days. Multiply this amount by three months.

How can you save enough for an emergency fund?

Identify 'wants' versus 'needs' using your monthly expense tracking. Realize that every purchase of a 'want' reduces your ability to be financially secure for your needs.

Make changes to reduce unnecessary overhead costs, such as to eliminate money wasters that are not necessary and actually keep you from reaching your goals.

Pay yourself first for your emergency fund and set up an allotment into an account that you will not touch unless there is a true emergency: a death or extreme illness of a family member or 'no pay due.'

Seek help on how to reduce your debts to minimize financial emergencies. Call your local the Airman and Family Readiness Center and ask for an appointment to discuss your financial goals.

You must prepare now for the next emergency. If you are financially prepared, you will have the confidence and resiliency to deal with any financial emergency that can be thrown at you.

Comments

4/30/2011 3:28:38 AM ET
Steve, to save you from the continued embarrassment of trying to defend an indefensible position, I will go ahead and declare victory now. You have changed your position from "it is unpatriotic and selfish to expect the government to actually pay your salary" to "it is not unreasonable to expect your paycheck" which is probably about as far as your patriotic ego will let you go. Not unreasonable. Yet still not completely reasonable, apparently. Good luck with that...

Russia, Not Really Russia--yet

4/28/2011 11:51:08 AM ET
Steve, you're myopic views are not letting you see this from other people's points of view. Yes, sound financial savings are are a necessity be it a savings account or a jar of money you put on your fridge for emergencies, but for airman who live off base alone and have a one bedroom apartment that takes up all BAH it is quite difficult to save much of anything. I for one have a savings account. I've been in for 2 years now but ever since I have been in I have had a lot of illness in the family and had to use up over half of it. The rest, without pay, would last me a month maybe. What if the Government shuts down for 3 months? What if it's 4 months? I don't live outside of my means. In fact, I only pay about $47 a month for my car insurance, and my car has been paid off for nearly 4 years now. The apartment I have is small but comfortable and if I were to get one for less it would be on a bad side of town with a lot of known gang violence. What about people like me?

Wowzers, Lackland AFB

4/27/2011 3:52:39 PM ET
Steve, your last comment is as ignorant as it is condescending. My OHA -- in a place Uncle Sam directed me to live -- is $4,500. I am not living above my means. I am living at exactly the level the govt expects me to. I suppose I could have been patriotic -- as I'm sure you would have been -- and found a cheaper and less safe place to live, but guess what? My OHA would decrease to match it. So by living in a cheaper place when the govt decides to stop paying me for the work I've done I still don't have the money to pay the rent. Clearly you've never been stationed overseas in a place where there is no base housing. So you can take your condescending patriotism elsewhere and come back when you know what you are talking about. Here's your sign...

Russia, Russia

4/27/2011 1:28:50 PM ET
Chris, I agree with you. It's not unreasonable to expect our paycheck. However, it's also not unreasonable for people to financially plan accordingly. Uncle Sam is required to pay us but is not responsible for how we manage our money. Once again, the point of this article is personal financial responsibility regardless of who pays you or what crisis our government has.

Steve, Tampa

4/27/2011 12:02:02 PM ET
Well, Steve, I can assure you that Uncle Sam is relying 100 percent on you to do your job. In return, I don't think it is unreasonable for you or other servicemembers to rely 100 percent on Uncle Sam to pay up on the 1st and 15th. And for your information, I don't personally sweat anything. I took my toys back in 2004 when force shaping was just beginning to grow wings and jumped ship started a security company and never looked back. That doesn't change the fact that I empathize with those who still serve.

Chris Kimball, Louisiana

4/27/2011 10:57:27 AM ET
Russia, you did get your last paycheck did you not? Yes, we EXPECT to be paid but we know all too well that many poorly manage their finances thereby relying paycheck to paycheck to get through life. I'm not going to get into personal finances but you chose to pay $4,500 a month in rent. If your base pay, OHA, and COLA can't cover it, then here's your sign...

Steve, Tampa

4/26/2011 4:05:12 AM ET
Steve, what part of "expecting a paycheck for work performed" IS part of a servicemember's managing of their finances? Don't you understand? I'm so proud of you that you're able to keep your financical house in order and pay your bills over there in Tampa-stan. I know it gets rough. How about you come over here to my OCONUS location and pay my $4,500 per month rent without a paycheck Ohm and $4,500 a mo doesn't get you very much here... For how many months will YOU be patriotic and work without pay before you start to worry about meeting your financial obligations? Do you have $20,000 in your emergency fund -- not your retirement fund, your emergency just-in-case-the-government-decides-to-stop-paying-me fund in case Uncle Sam, who you say you don't rely on, decides to stop paying you? While your high and mighty sermon on taking care of yourself sounds great, being stationed OCONUS at a location your Uncle Sam chose for you, and being "forced" to rely on him for OHA and COLA just.

Is this Russia, Russia

4/25/2011 12:40:16 PM ET
Russia, Chris, p.o.v: I am well aware of the obligations of the DoD to its service members and wholeheartedly agree that government mismanagement is a travesty that military members should not bear. HOWEVER that does not change the fact that YOU are still responsible for managing your finances, which is the point of this article. Do I expect to be paid for services rendered? You're damn right I do. But at the same time I don' rely one hundred percent on Uncle Sam to ensure my financial security from paycheck to paycheck. What pay I do receive I ensure I invest in MY OWN financial future so I don' end up like you, all stressing out about how to pay bills. Like everything else in life, you can' rely on others to take care of you. You have to take care of yourself.

Steve, Tampa

4/23/2011 3:13:27 PM ET
Steve, please spare me the 24/7/365 banter. I spent time in two different services so I understand the concept of service. However both my enlisted and officer contracts stated I would be paid a specific rate for my service. So yes, the military is obligated contractually to pay their service members. As for unemployment benefits, you need to do some more research on the subject. RIF'd or otherwise, involutarily discharged military members CAN receive unemployment and in the civilian sector there isn't any such thing as your company electing to not pay you. You are simply fired. You and I can agree to disagree on what constitutes an emergency but make no mistake, the DoD is obligated to pay their service members.

Chris Kimball, Louisiana

4/23/2011 6:34:03 AM ET
Steve, you think that expecting to be paid for the work I perform is selfish In what liberal utopia do you live? I should work for free -- out of the goodness and patriotism of my heart? I should expect to pay my rent and feed my family from patriotism and warm fuzzies? Maybe I should simply stop working and go on the dole like so many of the other welfare babies JFK and his punish-those-who-actually-work lefty ilk created. Is that more patriotic? I'm sure you ruminate on JFK's quote everyday as you work for no pay, right? Because it would be unpatriotic and selfish if you expected your employer to pay you, right? If you really don't want your paycheck send it to me.

Is this Russia, Russia

4/22/2011 10:42:43 PM ET
Patriots? Really, Steve? Goverment doesn't owe us anything? I don't ask for much but for all the sacrifices we make I at least expect to receive my pay. You don't think our wealthy politicians should shoulder all the blame for their political games? You're mistaken, my friend.

pissed off vet, some random base

4/22/2011 10:21:40 AM ET
Russia - I think we all relate to the frustration with our government and politicians WE elected to represent us. However, I find your opinion that this country OWES YOU something to be a selfish sentiment. I don't recall the Constitution saying anything about OWING its citizens anything. Sure it says we have certain rights but they are PRIVILEGES paid in blood by our service members. Our men and women may join for various monetary reasons but they do so voluntarily as PATRIOTS. I believe the quote from President John F. Kennedy's inaugural address of 'Ask not what your country can do for you, ask what you can do for your country' is something to ruminate on.

Steve, Tampa

4/22/2011 4:36:59 AM ET
ddub you are wrong. The blame _can_ be put on the government. For decades and decades they've been spending more than they--we the taxpayers--can afford. And now when someone wants to fix that and we are used as their pawns, the government isn't to blame? Wrong. They are absolutely to blame. And the government absolutely _does_ owe us something Pay for work performed. What is this, Russia?

Is this Russia, Russia

4/22/2011 2:29:25 AM ET
@ Riley Virginia. Being a military spouse is a job that contributes in ways that cannot always be measured in monetary means. A deployed member who knows that his or her spouse is back at home supporting them and taking care of their interest is priceless. The amazing thing about America is that we can choose. Some spouses choose to stay home with their children and provide a loving home environment home school children; perhaps some spouses have chosen to stay home because it's not financially efficient to send multiple children to daycare. In that way these families are saving for the future. I am a working spouse and I admire those spouses, be they male or female, who have chosen to stay home and look after this country's most valuable treasures. But, like I said, it's America and we can choose. And some of us have chosen to make small-minded unproductive comments. GOD BLESS THE AMERICAN SERVICE MEMBER AND THE SPOUSES THAT SUPPORT THEM

proud USAF Spouse, RAF Mildenhall

4/21/2011 3:47:32 PM ET
Maybe Air Force spouses can get a job so they can contribute needed income.

Riley, Virginia

4/21/2011 11:55:13 AM ET
No matter what method of savings one uses staying committed to saving is the key. Government will do what they do but blame can't always be put on the government - as if they owe us something. Although the government shutdown is a legitimate concern just like anything else only WE can make sure that we and our families are financially secure. It takes a lot of discipline but saving is well worth it.

ddub, Texas

4/20/2011 5:26:28 PM ET
We have an emergency fund but it's taken us years to create it and to build it up... and I doubt it would replace 8 full months of no pay. But it is a start and I agree that most people should have one. What I'd really like to see though is legislation protecting military pay from ridiculous political gamesmanship.

Mollymouser, California

4/20/2011 3:58:59 PM ET
Chris Kimball Louisiana - I agree that military members should not have to suffer the burdens of the political circus. However, it should be noted that personal financial responsibility is a separate issue from political financial responsibility. Service members duty is 24 /7 /365 with or without pay. Unlike the civilian sector, military members cannot file for unemployment or utilize any of the unemployment benefits that many companies carry such as COBRA. Therefore, it is up to the member to manage their finances accordingly and plan for emergencies, to include those of Uncle Sam.

Steve, Tampa

4/20/2011 2:01:17 PM ET
While I agree with the author that people should strive to have an emergency fund available for true emergencies, I take issue with the fact that the seemingly imminent shutdown of the U.S. Government is the catalyst for this article being written. Congress nearly failing to put aside partisan quibbling long enough to ensure America's fighting men and women get a paycheck does not qualify as an emergency. More suitable terms that come to mine are embarrassing, shameful and disgraceful. An emergency fund should be maintained for medical illnesses, civilian job loss or a death in the family. The Government defaulting on payments to its servicemembers is not something that our warfighters should have to worry about.

Chris Kimball, Louisiana

4/20/2011 1:31:02 PM ET
There are 10 more paydays until the end of this fiscal year. Even if you can only save 10 dollars a paycheck from now until then you would have 100 saved for gas or some food. Anything is better than nothing.

Retired Shirt, The Bank

4/20/2011 1:26:01 PM ET
Ill bet anything that a very large majority of those who were truly concerned or even frightened by the prospects of not getting paid have yet to alter their ways. How many of them got that paycheck on the 15th and ran out and bought that new video game? How many were at the mall shopping and going out to eat? How many of them have attempted or at least thought of a way to get rid of that must have 700 dollar a month car payment? My bet is not very many of them. Unfortunately, when the next shut down scare comes and it will probably be this fall most will be on here screaming I won't be able to pay my bills or buy food.

Retired, Ohio

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