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Your Host, Randy Petrick
  • Writer's pictureRandy Petrick

EMERGENCY FUND 101: THE KEY TO BUILDING FINANCIAL RESILIENCE

Updated: Mar 28

(Including "What I Learned the Hard Way and How You Can Benefit")


Trust vs. Plan and Save

As Christians, we are called to be wise stewards and to trust in God's provision. That's an interesting pairing of ideas. Does trust imply that we do not need to plan and save? I don't think so. Life can bring unexpected challenges and expenses; a good steward should acknowledge those possibilities and prepare for those emergencies.


The Bible encourages us to trust but also offers numerous insights and guidance on the importance of preparation. One well-known scripture that addresses this is found in Proverbs 6:6-8 (NIV):


A single ant crawling along the ground at dusk

Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest.


This passage highlights the idea of being diligent and proactive in preparing for the future, drawing inspiration from the ant, which diligently stores food for times of need.


Should we be preparing for times of need just as ants do? Yes! Many of us rely on multiple income streams or freelance work in today's gig economy. While this is great for providing flexibility and the potential for increased income, it also comes with inherent uncertainties. An emergency fund can act as a buffer, allowing us to navigate through lean months, unexpected gaps in income, and other emergencies.


What is an Emergency Fund?

An emergency fund is a designated pool of money to cover unexpected expenses such as medical emergencies, car repairs, or sudden job loss. It acts as a financial cushion, allowing us to be good stewards of the resources God has given us.


When we have readily accessible funds, we can also navigate through emergencies without negatively impacting our financial stability. By using our emergency funds for unexpected events, we can avoid debt and continue fulfilling our financial obligations, such as mortgage payments, utility bills, and other essential expenses, without adding the unnecessary and unwanted stress that comes when we exceed our budgets.


Perhaps best of all, having an emergency fund not only benefits us individually but also enables us to contribute more effectively to the work of God's kingdom. When we are financially secure, we can give generously to our churches and other local ministries, help meet the many needs within the global community, and successfully be the good stewards God calls us to be.


Learn From Me: Why I Kept Failing When I Tried to Build My Emergency Fund

So, I'm a pretty good student, right? I read many books and articles and research topics with gusto (I'm stating that kindly) to increase my odds of success. And I did that when I first learned how to build an emergency fund. I learned:

· to still prioritize my giving. Acknowledging God's blessing is the foundation of any Christian financial plan.

· to assess my income and expenses.

· to create a budget.

· to set realistic savings goals.

· to automate my savings with an automatic monthly transfer to my emergency fund.

· to minimize frivolous spending.

I did all those things…and yet my attempts to build my emergency savings kept failing. My first goal (attaining $500 in the fund) went fine, but my next goal (attaining $5,000 in the fund) failed time after time. I'd get close to the $5,000 mark, but every time I started getting excited about my progress, something would happen, and my fund would get wiped out again. It was so frustrating.


Then, one day, I was listening to Dave Ramsey talk about Emergency Funds, and he uttered (yelled, maybe) the phrase that finally saved me…


"Christmas Isn't an Emergency!"


Bingo. My problem suddenly came into focus. Most of the things depleting my emergency fund weren't emergencies! Christmas comes yearly; property taxes come yearly; my medical insurance deductible comes yearly; my car needs maintenance and oil changes yearly; my wife's birthday comes yearly…well, you get the idea.


I realized that I needed to set up a separate savings account for all of these "non-emergencies" that come every year (but not every month), divide each expense by 12, and set aside enough each month to have a reasonable chance of having the money ready for each one when they came along each year.


That did it! Once I started saving for all the non-emergency expenses separately from my true emergency fund, my emergency fund finally hit my $5,000 target and breezed right on by.


Avoiding Guilt and Regret

Emergency Funds are great for helping us to reduce stress, anxiety, fear, and worry.

They can also reduce our feelings of helplessness and vulnerability during challenging times. Without emergency funds, we are far more likely to make decisions that do not benefit us (such as those mentioned above: relying on credit cards, taking out loans, or borrowing money from others). Those decisions and actions can lead to regret and guilt. Let's avoid them.


Building a Solid Foundation

Building and stewarding wealth requires a solid financial foundation, and an emergency fund is a fundamental component of that foundation. Building a fund helps us learn financial discipline and encourages us to save consistently. Just remember: Christmas isn't an emergency! Learn from my mistakes.


Conclusion

Building an emergency fund is wise. When we do so, we demonstrate good stewardship over the resources entrusted to us by God. By having financial safety nets in place, we can experience peace of mind. Unexpected crises will be much less likely to derail our commitments to honor God with our finances or hinder our ability to serve others selflessly. I encourage you to build and maintain an emergency fund so that you can navigate life's uncertainties with confidence and continue living out Christ's love through practical acts of generosity and service.

 

After Thoughts

First, I want to quickly acknowledge an assumption I've made while writing this post. It may not need to be said, but I am assuming that if you've found your way here, it is more likely than not you can set aside some amount of money (however small) to work on building an emergency fund. Not everyone is in that place, and I do recognize that. If you are blessed to be able to set some money aside, as I have been, be sure to thank God for that ability – and keep an eye out and offer a hand up to anyone you meet who isn't. Giving, as our way of reflecting God's incredible love for us, should always be at the forefront of our thoughts and actions.


Second, as I've listened to and read financial news over recent years, I've realized that there are two major financial concerns facing most Americans – 1) the inability to financially handle unexpected emergencies that arise and 2) being smothered in credit card debt. This post and the one that will follow (Paying Off Credit Card Debt) are my contributions to the conversations around those topics. My mission is to help people successfully steward their lives. I pray that these humble posts from my life and heart will help you exactly that way.

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