What Is An Emergency Fund for Anyway?

You've probably heard of it before (it’s nothing new), but have you ever wondered WHY we have an “emergency fund”?

My whole mission is to empower you so that you know you have the knowledge within you to make solid financial decisions yourself.

Because that’s something you can carry with you for the rest of your life.

So… what is an “emergency fund”?

Let’s start first with the energy and intention behind it.

I don't tend to call it an emergency fund (but it’s often called that).

Why?

Because I don’t want to manifest a freaking emergency!

I have zero intention to put that energy out into the world.

So instead I have money to enable me to make decisions in line with my values.  Money that I have set aside to help protect me, to make me feel secure, money that gives me choices.

More aligned names might be: cash reserve, buffer fund, overflow account, a rainy day fund…. or you can get a lil spicy and go with f*ck it fund (to do what you want).

Our words have incredible power, so when it comes to what we are creating -  we literally speak our desires into existence.

Ok, that aside - there is also the practical part about what this fund is actually for.  And there are a lot of them. I talk about this in this episode - why we should have one, what is the point of it, and how much you should actually have set aside.  I also cover real numbers on “how much” you might want to hold.

Dive into this ep as I talk about this amazing financial foundation, so you can set yourself up for long term wealth creation and investing. 

xo

Simone

P.S. If you want to continue learning after this, watch the free investing training found at www.mswealthy.com

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My name is Simone Mercer-Huggins. I am an investor and trader, and so far I've built over seven figures from the ground up. And now this community is doing the same. The Ms. Wealthy movement is here to share tools, resources, strategies, and support, and all things, financial freedom tune in for everything, money investing, mindset trading and everything in between. If you want to be a powerful player in the wealth creation game, you're in the right place. So welcome to the kiss, my money. Okay.

Hi, welcome back to the kiss, my money podcast. I'm your host samosa Huggins. And if you are new around here, then I want to tell you a little bit about me. I run the company Ms. Wealthy, and we are all about education around finances investing and wealth creation, and we do it globally. So we do it particularly for Australia, us and the UK. We have many members inside my signature program, investing bootcamp, which shows you exactly how to sort your money stuff out, and then also build wealth through investing mulled through multiple things too, not just the stock market. We talk about crypto. We talk about mindset, the impact of tax and everything in between. So today I want to talk about one of the inception things. The baby things are foundational things around money, and you've probably heard of it before. It's not a new concept, but sometimes it's a little bit unknown as to why we have it.

There's also a really huge range about the quote unquote advice or guidance around what you should have. And that is all to do with an emergency fund. I also want to talk about the energy behind it. You know, that I am many people have called me any different things. I say wealth expert and money guide and money coach. But I guess for me, it's all about money, potential wealth potential. And I am here to show you yours, that you have the power within you to execute it and to make the decisions for you. Long-term for the rest of your life. You never have to hand your power or your money over to anyone else. And it's so that you can make your own decisions around that too. There's no right. And there's no wrong sometimes as guidance, but it definitely doesn't always apply. So I want to talk about an emergency fund and also the energy behind it.

Now, if you're new around here, then you may or may not know that I, I look at wealth from a holistic point of view. Yes, it's all about the practical. And I approach it with a very practical, how to physical, to do lens. Meaning we give you all of the steps to actually implement money stuff, how to set up your accounts and do it well, and how to do the step by step around investing like physical wealth creation. Right. Very practical. But I am very, very, very experienced, uh, knowledgeable and have a deep belief system around the energy of manifestation and law of attraction. But I approach it from a quantum physics view. So I guess you could approach manifestation energy frequency through kind of two lenses. Really one is the spiritual, you know, the element of like really trust and releasing and the unexplainable.

And then the other is the kind of science really behind energy and frequency, which is the way I have always gravitated towards the latter, the quantum physics side, like, oh my God, how do atoms actually work? How to frequency work? What is the law of attraction in terms of the physics science side? Now I also get into the other stuff. I'm quite spiritual. I'm very spiritual, but I've always understood it with that like scientific view. So I want to do, I do want to talk about the energetic side of the term emergency fund, and I don't tend to call it an emergency fund, but most people know it as that. So that's why I want you to understand that's what I'm talking about. I tend to call it a it fund, which is basically kind of what it is for. I mean, my approach is that it's, it's, there's money set aside for you to kind of be like, it kind of thing.

Meaning if your boss is an and you've just your mental health cannot take anymore, then you go, well, it. This is my fund. This is what it's here for to help me to protect me. I have money to make decisions in line with my values. Money gives me choices, right? That's why we have money. It was just there for an experience of everything for us to feel emotional, emotional, right? The emotional side of it. Because otherwise what's the point of experiences. We only have experiences we'll seek out experiences because we want to feel something. Um, we want to experience the emotional component. So I tend to reference it as a it fund. And if you want to replace the word with something that is more palatable, if you don't love swearing, then totally up to you, I do encourage you to call it something that is aligned with you.

The reason don't like to call it an emergency fund is I don't want to manifest a freaking emergency. That's not the intention. So I don't call it an emergency fund. And I have never, in my life manifested an emergency. I have experienced emergencies and I've experienced some really crappy really things. Things that, you know, no one should go through. Things have happened in close to me and my family that no one should ever go through. And a lot of it, I actually don't talk about some of it is deeply personal and I just, you know, only my close friends and networks know, uh, for the things that have happened to my close family. They don't want it shared, so I don't share it. There are so many things I would love to tell you. And like so many like lessons and like, oh my God, I wish that I could tell you, like, you know, it has come out of it, but it's not mine to share.

But just know I grew up in not in a wealthy family, I've had a background of not amazing stuff happen. Everyone has a history, right. But I still don't want to manifest anything like an emergency. And I don't tend to. So the first thing I kind of want to know is call your cash reserve. Something that aligns, and it could be literally just that cash reserve. Um, it could be a fund. It could be a choice and, you know, choice front fund, meaning it's just something that is there for choice. It could be a rainy day fund. It could be. Um, what are some other words I've seen? Oh, definitely overflow. Something that aligns with a lot of people. Isn't overflow account. Now I tend to use overflow account for like literal overflow of money and to call an overflow account there so that, you know, this money comes in, money, comes in money, comes and I experienced income and cashflow from multiple sources and unexpected sources.

So, um, everything that comes into my bank account, essentially I call an overflow fund. Um, I also have an offset account, which is tied to my property, like investment loan. So it offsets the interest. Anyway, the point is I have that cold and overflow, but if you wanted to, you could call your emergency fund overflow fund. It could be things like, uh, just-in-case fund or really anything that aligns is no right or wrong. But I like to set up the intention around the wording to be something that is more helpful. Let's just say I don't call emergency fund particularly helpful. Um, where it's a very powerful, if anything words are the basis of all manifestation or energy, all visualization, all journaling, all affirmations, the way we talk to her, oh, selves, it's all C deeply. In words, they have incredible, incredible power. And when it comes to what we are creating, we literally speak our desires in, into existence.

So it comes from words. So I encourage everyone here to call their fund something. We can all name our bank accounts. Right. Um, so please do call it something that is more aligned. Now that's the, that's the energy portion kind of done, but I want to talk about what this fund is actually for why habit, what is the point of it and how much you should actually have? Why do people talk about, you know, some figures and some numbers, some people freak out that it's not enough or too much. So I am going to be running through that today so that you have the base ground knowledge, because this is where really everyone starts, at least where I guide people through insight investing bootcamp, we kind of have, it's almost like split up into two portions essentially. First is the commanding your cash component, right?

Essentially the mastering your money. It's like, how do you actually manage money? Well, and setting yourself up for that longterm. How does what your accounts, how to spend and save and understanding and having the foundations around your finances right first, before we dive into wealth creation and investing. So when it comes to that, the first component inside investing bootcamp is managing money. And the very first step is essentially having this fund. And the reason is because we really don't want to be investing into anything, whether it's the stock market or crypto or housing or whatever, unless we have cash on reserve in case anything happens in case you need to need to, or just have to, for the sake of your mental sanity, quit your job. For example, we want to put you in the best possible position of having options and possibility. And it's just a more intelligent decision to make so that you are set up for the volatility that comes with any investment, really.

And if you're going into any investment, it really shouldn't be like a short-term thing. So we want to have cash rose up. Now there is this debate and there's just really, it's just essentially a lot of copying. Now, a lot of people now say for, you know, quote, unquote, emergency fund, it, fund that you should have three to six months of expenses and talk about why. And also I'll talk about why I don't follow that either. I have never done it in that way. Um, but it does have to be aligned for what is right for you. So the reason people say three to six months of expenses is because you want to be in a position that let's just say, you lose your job, that you can comfortably cover your expenses for three to six months until you can get income again, so that if you have investments and let's just say, we're in the middle of a correction or a crash, you don't have to pull your investments out and sell your investments at a loss.

And even if, when not in the middle of a crash or correction, so that you don't have to sell your investments because your investments are not there to sell and then use as cash as income just to pay for everyday stuff, your investments to grow wealth so that you can buy back your time so that you have a net asset pool of investments that just pay you money. And so that you can quit your job or your business, and just be paid from the income or the dividends or the capital growth from your whole investment pool. Right? So regardless of whether there is a crash or not really the whole point is we don't actually want to sell anything at any point, unless it's for a particular goal and selling it because you want to quit your job, or because there's an emergency or because you've had a crack crash and you don't have insurance.

So because, you know, if something happened to you health and you need $10,000 for an emergency surgery or whatever it is, we don't want to be using investments to pay for that. That's not really the point. So that's kind of why they say three to six months because you want to have enough of a buffer. And also we don't really want to put you in a position where you're freaking out emotionally and psychologically because when our emotions are high intelligence is low it's inversely correlated. So there is a, there is a high chance of making an unfortunate or less intelligent decisions, not particularly intelligent decisions. When we have heightened emotions of fear or panic or stress, worry, freaking out any of that stuff, we tend to make these rash decisions and can't see clearly. And that happens to everyone. It doesn't matter how much personal development or spiritual work you've done.

It still happens to everyone when you're in the peak of a crisis. Yeah. So that's why a lot of people say three to six months, three on the kind of, you know, minimum end and six of like, well, you know, you have more of a buffer and you can take your time and you don't have to like rush into anything. Now I'm going to real with you here. I'm always very transparent about what I do with my own money. I do not have three to six months of expenses. So when we look at expenses, it's literally anything that costs you to live. So for example, rent or mortgage groceries bills, and, you know, just day-to-day stuff. Like I don't mean that you need to be going out to dinner three times a week, but it's, you know, three to six months of expenses realistically for you to live, um, in case of emergency.

And it also means that if an emergency does happen, well, you probably going to have to use some of that. Anyway, let's just say three to six months of expenses for you is $20,000. I'm just literally picking a big, uh, ballpark number, right? And let's just say, you have to spend $10,000 on our emergency health surgery. Then you've got $10,000 left. So it doesn't necessarily mean that you have six months anymore. It may, it might mean that you only have three months because you had to spend that money on the thing that you had to spend on. Right? But that doesn't mean that you don't have options if anything ever were to happen. And this is why I don't have three to six months of expenses. Now I have been doing this for a really long freaking time. If you know, my backstory, you know, I got into thousands and thousands of thousands, tens of thousands of credit card debt, nothing to show for it when I was 20, because of a whole host of factors.

And then that was the turning point of me hitting like my essential rock bottom at that point of like, not another day, not another moment. I, I can't, I also maxed out my credit card. So I had no other options. It was kind of forced upon me. And it was also the best thing that possibly happened because it was the turning point in me going crap. I really need to understand money. My mom was always good at managing money, but that doesn't mean that she taught me. In fact, she didn't teach me. And that I see that with families all the time, you might have parents that are great at money or really frugal, or, um, just great at stretching a dollar to make it go further, or they know how to invest. And they invest in the stock market. And yet they haven't taught you a single thing.

And it's really important to know that just because you know, or your parents know, or your family knows how to do something, that doesn't mean they know how to teach it, let alone, even if they know how to teach you, it, it doesn't mean that they do. Right. And it was funny because I, when I had this conversation with my own mom about this is like quite recently of, you know, talking about money management and stuff. And me being in that position when I was 20. And she said, you know, I just don't ever know how it happened because I was been so good with money. And always, I've always been really frugal. And I always knew how to like, manage money really well. I just thought you'd be good at it. And I was like, well, you never told me. I also never asked, but, and she was, and she said to me, I just would've thought that you've learned you would have learnt through more modeling, but I don't like I don't have, I didn't have, um, into an intimate view of her finances or how she managed her bank accounts or what she did and how she split her income.

I didn't know. Like I didn't see any of that. Right. I saw her spending or not spending money. Like I know the decisions that were made and I know growing up, we didn't have a lot of it, but that doesn't mean that I learnt really anything about how to manage it. So just because it happens in your family doesn't mean that you know how to do it. So if you've, if you've been beating yourself up because you haven't known how and you've thought, well, how, how do, how can I not, or my sister knows how my brother knows how my dad's an investor and I'm not like there must be something wrong with me. There's not, there's just, you either, you've never asked, or they'd never taught you where they don't know how to show you. Right. So slightly digressed. But the point is, if you don't know how to manage money, it's okay.

And you might be in a position currently where you're in debt or you have some money or you are already investor. It doesn't really matter either way. We want some money set aside just to have the safety net of in case, in case anything happens. And it really is the physical part of having money, but it was also the psychological part of, I know I had some funds there in case anything happens. So I know I feel, and this is really important for you to understand that the feeling of safety and security is really important and it is really, really individual. So when it comes to what I personally do, I do not have three to six months. And as I said, at the beginning of my digression, that I've been doing this for a very long time. So essentially since I was about 23 ish, because I was in debt deeply in debt at around 20, I started getting out of debt when I was 20.

So I kind of built it by about like 18, 19. I moved out of home when I was, I think it was 18, uh, built up a bunch of credit card debt and then realized at about 20 that I had to pay it off. I got a second job and I paid it off when I was, uh, I was about 22, maybe 23 ish. And so at that point I had, or I already had the skill. So essentially at 20, that was when I learnt money management, but it was from a place of, she had desperation. I had no other choice. My mom sat me down and taught me at that point. And I learned how to get a debt and then continued that exact same behavior and habit into saving. So I've been doing this for now, 17 years, essentially, this habit. And I have never, in the whole 17 years of doing it, I have never had a huge emergency fund.

Now at 37, I have, you know, a pretty good high income. My husband has a good income as well. And still it's been the same for you years and years and years, probably for at least five or six or seven years now, I ha we have collectively together $6,000 in emergency fund. it. Fund overflow fund in case of emergency, in case, you know, rainy day fund insert any name, that $6,000, that's it, that's it. And I have not once ever needed to use it. And I want that to really sink in because often that the fear of, oh my God, then there's going to happen. I need to be in a position like, oh, I need to have this money. It's not, it's really irresponsible about, I don't have this money. No, that's complete BS. It's not irresponsible, or it's not responsible to have it.

It has to be aligned with you. Now, I want to give you a quick insight as to why I have success in dollars. And by the way, $6,000, just not even come close to covering, that would probably cover a, like, we would be fine for a month. Let's just say, yeah, about a month, it'd be about a month. And then, then that's it. And we're about to upgrade where we currently live in terms of our apartment. So we rent and we have investment property, um, and a lot in, in stock portfolio, but it's a better financial decision. It's also a choice to rent where we live rather than buy. So we're about to upgrade. So our living expenses will increase significantly when we do that. So it'll be even less time that that $6,000 will cover us for, but the reason I do it this way is number effect is number one, I believe deeply in my ability to just work out.

Meaning if something happens, then I have options. I can, but not necessarily options I want to do, but I know that I can. It's a possibility. It's not a desire and it would feel crappy doing it. But also I'm willing to take that risk of that possibility in the worst case scenario and therefore have more cash in the stock market because my money sitting there gathering EFL interest in a savings account, isn't actually serving me and the emotional component component of having cash on reserve as safety just doesn't do it for me. I am deeply driven by wealth creation and that does it way more for me than having cash in reserve. Like I actually think it's a complete waste personally. I, that's not, that's not savings or investment or financial advice. That's my personal, that's just what I do. Right. And my approach, which is why we have what we have in emergency savings that we've never, ever used or touched.

So, uh, I believe deeply my ability if something was to ever happen, that I can work it out, we can worst-case move out of our place. You know, stay with friends, ask to move into my sister's second bedroom, move into my mom's basement, open to, you know, like my dad. And it wouldn't, I mean, it was be so ridiculous trying to make any of these work, but we would make it work like it could happen. Um, I could ask to move into my, uh, husband's brother's place. Uh, we would just, you know, move into massively downgrade, if anything, major, whatever happen, worst case we could sell investments. If we absolutely freaking had to, I could ask to borrow money from parents and or friends. Um, and he got a loan. We don't have any credit cards or loans were complete, like this zero a debt in anything.

So worst case I could get a credit card or could get a personal loan. Like we have good income. It'd be very easy to just go out and get a credit card. Um, so I believe deeply in my ability to just work it out if it were to happen. And that is why I don't have a lot in a cash reserve for a rainy day. That's my, just, just my personal approach. It's varies massively with other people. So I have a close friend of mine. She's incredibly intelligent. Uh, she ends, you know, really good money and she is scared. You guys get I'm investing in the stock market. She comes from a European family. And just from, because of her upbringing, they just have never trusted the stock market and have always trusted property and cash. That's it, that's it. Like I have cash under the mattress.

She thinks she thinks her parents have cash under a mattress. And she believes deeply in property, even though she knows the numbers and she knows it's irrational and she knows she's missing out a massive returns. She can't get over that notion of, uh, investing because she wants to have a lot of money in cash reserve. When I say a lot of money, I mean, for her, she needs to have a hundred thousand dollars in cash reserve. And then anything on top of that, she's happy to invest because she sees it as, oh, she could just lose it. Even though she has me as a friend to explain everything around investing, she's very intelligent, but the emotional belief system that from her upbringing just hasn't allowed her to get across the line of really seeing it. She's starting to now, it's actually literally in the last couple of weeks where she has started to see her forced cause she's also in Australia, um, her forced retirement account, which we have in Australia, like in many countries, we have forced retirement accounts called SUPA, uh, with employers.

And she started to see that grow, not just in net asset value because of the contributions, but also because of the investment return. And she started to really, I'm seeing a shift already in her, in her mindset around it. She's starting to get it, but for her, the minimum is she wants a hundred thousand dollars of cash reserve. So you can see that that's the opposite end of the scale to me. And it's not wrong or bad. That is just what for her. She feels safe and secure with having that, uh, as adjusting case, even though nothing horrible has ever happened well, right. So I want you to see really clearly that there is no right or wrong. There is no, like it has to be three months and it has to be six months. Or if you don't have six months, it's irresponsible or I can't believe you're investing because you only have $10,000 in an emergency fund or whatever it is.

I want you to come to a solid conclusion around what is right for you. Okay. So you have three year, three pieces of homework now. Hmm. I don't love the word homework. I'm going to be honest. I didn't love, I didn't completely love school. They didn't have a great time. I don't wish school in anyone. I was bullied and I changed high schools. And so I didn't have like many friends in my last two years in senior school. And you know, I just, I just didn't have a great time. I was still myself out. I only got my confidence later in life. Like, you know, all those things. So I didn't love the word homework, but let's just say we have, I have three things to do that are really going to significantly help you become more powerful around your confidence around money. How does that sound?

Right? The first one is to name and or create both of you don't have an overflow account, a rainy day account. Um, if you don't have a bucket fund, then create one. And then your second one is if you already have one and if you're creating one, then you name it. So that's the first thing, right? You're naming it. Something that is aligned with you. The second thing is working out the amount of money you're going to have put aside. Now it might just be that you, like, I dunno, I'm just going off the guidance of three months or I want to be a little bit more cautious and I'll go six, but you might be like my friend and be like, no, like I need to have like a lot of money to feel like it's okay. And, and that's fine too, but just work out what that number is so that you have it, that number, that target, and it might been that you've already got that amount in there, which is amazing.

Great. It might be that you haven't felt confident around the number and if you have enough, but just be really clear about what that number is. And also as a side note, let it serve. I'm not going to go deeply into it, but, uh, if you do have debt, really the first step is just have like built up that kind of it fund to like a thousand dollars and then focus on paying debt down debt. And it depends on the debt, right? Like if it's above 7%, ideally you're paying that off first before you start investing. But if it's a lower amount and like, you know, three or four, even 5%, then you can start investing whilst paying up debt at the same time. It's kind of like doing those two combined means that you actually make massive strides because you can get really great returns and investment.

And you're actually building the habit whilst paying down debt simultaneously. Okay. So just as a quick side note, but when it comes to the amount of money, w if you have debt, at least get a thousand dollars just in there and then focus on paying down the kind of debt amounts, and then the number three thing is share it. So have a conversation with a friend, send me a DM, um, you know, do a story on Instagram and tag me and just share. You don't even have to have to share the amount. Like no one here has to share it at all. I'm very open with my money and sharing very transparent with my finances, but you don't have to share the amount, but at least that you have done it because these are the steps of like guys, this foundation of having first, once you start building this, not only like habit, but consistency and understanding and the knowledge, but the behavior, oh my God, you start doing this.

And then you're setting yourself up for the next step, which is investing. And even if you have doing this, but you haven't had the confidence, like the confidence in doing this, knowing what it's for understanding it so that you know exactly what is happening with your money. Like that is huge. I know that that can impact every single area of our life. So the three pieces to go and do, please go and do that now, or at least this week. And if you want to know more about continuing this, then come and join us inside investing boot camp. And this is just one of the baby inception, beginner things. And I explained, so I'm much more in the management money management component, which I call command your cash inside, invest in boot camp. This is where everyone starts, because like I said, you need to have all your money stuff sorted.

Before we move on to long-term wealth creation, it's kind of like building the house, right? We've got to build the frame to hold everything inside of it. So come and join us inside investing bootcamp. If this is what you want to continue with us. And a lot of other people as well, who totally get exactly the same path that you are on. Now, you can go to investing babe.com to learn more about the program and, you know, check it out, send me a DM. If you have any questions and you can also get free investing training. If you had to Ms. wealthy.com and you'll see it just there, you'll see like the chili that you can check out. Um, it's free training on investing in the stock market. And I talk about, you know, a lot of top-line things. So even if you are completely new to it, it's perfect for you because you'll really understand and get a lot of insight about how the whole thing works. All right, guys, I hope this is helpful. In fact, I know it has been, I will see you next week. Make sure you go and do those three things and the extra bonus instinct, go and check out the program. We'll do that. Free investing, training you next week.

If you are not part of the Ms wealthy movement yet, make sure you head over to Instagram and hang out with me. There I am at Ms. Wealthy official, and if you need anything else had to miss wealthy.com and get all the info that you need. Find us on Facebook as well. And I'd also love if you can drop a review on iTunes, it supports us massively, and it means the freaking world.