Building an Emergency Fund
Are you ready for a rainy day? Do you have a sufficient cushion of money in case your washing machine breaks down or your car refuses to start? The Bible calls us to be wise, and we need to bring this wise perspective into our finances. Today, I want to share a very profound yet fundamental aspect of personal finance.
Over the years of my personal journey in personal finance, I have come across many theories on how to manage money and how to have a proper approach. One book that really caught my attention is "The Total Money Makeover" by the American entrepreneur Dave Ramsey. Dave's principles are very straightforward and practical, and he calls them the Baby Steps of personal finance.
You can read about these 7 Baby Steps on this [link]
Today, I want to focus on the first of his 7 steps, which is called the Emergency Fund.
Faithful stewardship is a form of worship!
We are called to live out our faith in every aspect of our lives, including finances. Anchoring our financial practices in biblical wisdom allows us to approach the concept of an emergency fund with a spiritual purpose. Earlier this week, I had the chance to chat about this topic with someone in our church. As we were discussing, the Holy Spirit once again gave me a different perspective on this topic and enlightened me with new insights. It's true that in spirit, there is so much for us to learn; it’s like never-ending wisdom!
Proverbs 21:5 says, "Good planning and hard work lead to prosperity, but hasty shortcuts lead to poverty." This verse highlights the importance of careful planning and diligence in managing our finances. By creating and maintaining an emergency fund, we can honor God’s principles of stewardship and be prepared for unforeseen circumstances.
God’s Provision and Our Responsibility
As Christians, we trust in God’s provision, knowing that He will supply all our needs. Philippians 4:19 assures us, “And my God will supply every need of yours according to his riches in glory in Christ Jesus.” This beautiful promise reminds us that God is our ultimate provider and that we can rely on Him for everything we need. However, this doesn’t mean we can sit back and neglect our responsibilities. While we rely on God’s promise to provide, we are also called to be good stewards of what He has given us.
One practical way to show our trust in God’s provision is by saving for emergencies. Saving isn’t just about accumulating wealth; it’s about being prepared for unexpected expenses and showing that we value the resources God has given us. Here’s how we can break this down and apply it in our lives:
Acknowledge God’s Provision: Recognize that everything we have is a blessing from God. When we save, we’re not just putting money aside; we’re acknowledging that God has provided for us and will continue to do so. This mindset shifts our approach to saving from one of mere practicality to one of spiritual significance.
Set Aside a Portion Regularly : Consistency is key when building an emergency fund. Proverbs 6:6-8 advises us to look at the ant, which "stores its provisions in summer and gathers its food at harvest." Similarly, by setting aside a portion of our income regularly, we create a habit of saving that reflects diligence and foresight. Even small amounts, saved consistently, can grow over time and provide a substantial buffer for emergencies. In my perspective, you should aim to save at least a total of two to three months' worth of expenses as your emergency fund. This fund should not be accessed until you have an actual emergency. Remember, an emergency is not buying anything fancy or a gadget that you do not need. An emergency fund is meant for unforeseen circumstances that require immediate financial attention.
Prepare for the Unexpected: Life is unpredictable, and emergencies can happen at any time. Whether it’s a medical expense, car repair, or sudden job loss, having an emergency fund helps us handle these situations without panic or financial stress. This proactive approach is a way of honoring God by taking care of the resources He has entrusted to us and ensuring we’re not caught off guard.
Avoid Panic and Stress: Financial stress can be overwhelming and can even impact our faith if we feel unprepared. By having an emergency fund, we can face unexpected situations with confidence and faith. We know that we’ve done our part by being responsible stewards, and we can trust God to guide us through any challenges that arise.
Strengthen Our Faith: Saving for emergencies can strengthen our faith. It’s a tangible way of showing that we trust in God’s provision and are willing to be obedient to His call for stewardship. It reminds us that while we do our part, ultimately, God is in control, and He will take care of us.
Taking Action: Steps to Build Your Emergency Fund
Assess Your Finances: Start by looking at your current financial situation. How much can you realistically set aside each month? Create a budget that includes a specific amount dedicated to your emergency fund.
Set Realistic Goals: Don’t aim for an unrealistic amount right away. Start with an attainable goal, such as saving 2000 to 5000 Rupees. Once you reach that goal, set a new one. Over time, aim to save enough to cover two to three months’ worth of expenses.
Automate Your Savings: Make saving easier by setting up automatic transfers from your savings account to your emergency fund. This way, you’re less likely to skip a month and more likely to stay consistent. Keep this money in a place that is not easily accessible. I suggest parking this money in a mutual fund, preferably an Index Fund. This way, you are not tempted to withdraw this money unnecessarily.
Stay Committed: Aha this is the toughest one I would say hey but if it was so easy everybody would have had tons of money saved in their emergency funds but that is also the beauty of it. Building an emergency fund takes time and discipline. Stay committed to your goal, and remember that each step you take is an act of faith and stewardship.
This practice helps us acknowledge God’s provision, fulfil our responsibility, and face life’s challenges with confidence and faith. Let us embrace this call to be diligent stewards, trusting in God’s provision and honoring Him with our financial decisions. By doing so, we can experience the peace and security that come from knowing we are prepared for whatever life may bring, all while living out our faith in practical and meaningful ways.
Remember, God is so proud of you and is always there to help you!
I hope this article has helped you to understand the concept of an emergency fund. If you have any questions or would like to discuss this further, please feel free to reach out to me at Jo@jogonsalves.com. I would be happy to assist you!