March 4, 2026

126: How to Build an Emergency Fund That Actually Protects Your Family

Send a text Most emergencies cost more than $1,000. In this episode, Jessica and Brandon break down what a properly funded emergency fund actually looks like and why it’s one of the first steps in any financial plan. We cover: What counts as a true emergencyHow to calculate 6 to 12 months of expensesWhy expenses matter more than incomeWhere to keep your emergency fundWhy you shouldn’t invest itHow to automate your savingsWhat to do if you feel behindWhether you’re in a volatile industry, a du...

Send a text

Most emergencies cost more than $1,000.

In this episode, Jessica and Brandon break down what a properly funded emergency fund actually looks like and why it’s one of the first steps in any financial plan.

We cover:

What counts as a true emergency
How to calculate 6 to 12 months of expenses
Why expenses matter more than income
Where to keep your emergency fund
Why you shouldn’t invest it
How to automate your savings
What to do if you feel behind

Whether you’re in a volatile industry, a dual-income household, self-employed, or rebuilding after a layoff, this conversation will help you create a clear, practical plan.

An emergency fund won’t make you wealthy. It keeps you from going into debt when life happens.

Start small. Automate it. Build the habit.

Resources mentioned in this episode:

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Money, relationships, and the mindset to master both. Hosted by financial advisor Brandon and his wife Jessica, The Sugar Daddy Podcast breaks down how to build wealth, unpack old money beliefs, and have real conversations about love and finances. Their mission? To help couples and individuals grow rich in every sense of the word: emotionally, relationally and fina...

Chapters

00:00 - Why An Emergency Fund Matters

01:51 - Real-Life Surprises And Rising Costs

03:00 - What An Emergency Fund Is And Isn’t

06:53 - How Much To Save And Why It Varies

10:25 - Start Small, Avoid Debt, Build Habit

12:13 - Where To Keep The Money

16:57 - Budgeting, Automation, And Variable Income

19:35 - Tiered Expenses And Severance Nuance

22:00 - Too Much Cash And Opportunity Cost

24:28 - Buckets, Psychology, And Peace Of Mind

27:46 - Quick Wins, Tools, And Next Steps

28:46 - Ratings, Community, And Disclaimers

Transcript

WEBVTT

00:00:00.160 --> 00:00:04.719
Did you know that most Americans cannot cover a$400 emergency?

00:00:04.959 --> 00:00:08.480
That's why having an emergency fund is more important than ever.

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Between inflation, layoffs, medical costs, home repairs, pet costs that were unexpected, having an emergency fund is no longer optional.

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It's foundational.

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In today's episode, we're diving into all the nitty-gritty details.

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Stay tuned and join us.

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Sugar Deddy Podcast, yo.

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Learn how to make the pockets grow.

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Five minutes of freedom's way a week, bro.

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Smart investments, money flow.

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Welcome to the Sugar Daddy Podcast, where we help you build a financial plan so that you can feel confident in your money.

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Hey, babe.

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Hey, how are you doing?

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I am okay.

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How are you?

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I'm good.

00:00:51.679 --> 00:01:09.680
So it's very timely that we are talking about emergency funds today because earlier this week I came home and we had a$514 vet bill for Remy, because we never get out of the vet for less than$400, and it was$514.

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And he has two, well, one like broken tooth and one shipped tooth, and they have to be extracted.

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And I feel like it's going to be a small mortgage payment, and I'm super ticked off about it.

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Yeah, it's always something.

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And that's why this episode is about making sure that you have a properly funded emergency fund and what that actually means.

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Yes, because the one thing that we know for sure is that the emergency will happen.

00:01:38.560 --> 00:01:38.959
Oh, yeah.

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It's not a matter of if, it's a matter of when.

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Yes.

00:01:42.079 --> 00:01:47.359
It's always, I mean, in December, I had a flat tire twice.

00:01:47.599 --> 00:01:53.200
Remember, we got back from Aruba and my car was literally tilted in the garage.

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And I was like, oh my gosh, what's happening?

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And luckily we were able to just patch it.

00:01:57.599 --> 00:01:58.799
But in my head, I was already like.

00:01:59.519 --> 00:02:02.640
Well, no, I mean, we patched it for the I mean, we actually took it back.

00:02:02.799 --> 00:02:03.280
We did patch it.

00:02:03.439 --> 00:02:04.000
Didn't we patch it?

00:02:04.719 --> 00:02:05.040
We plugged it.

00:02:05.280 --> 00:02:05.760
Plugged it twice.

00:02:05.920 --> 00:02:06.079
Yeah.

00:02:06.319 --> 00:02:07.920
So those were Yeah, that was your second.

00:02:08.080 --> 00:02:10.159
That was my second time in a matter of a month.

00:02:10.479 --> 00:02:12.000
In yeah, in less than a month.

00:02:12.080 --> 00:02:16.319
But I'm what I'm saying is in my head, I was like, oh my gosh, how is how much is this tire gonna cost?

00:02:16.479 --> 00:02:16.719
Yeah.

00:02:16.960 --> 00:02:19.439
You know, because like the things happen.

00:02:19.599 --> 00:02:24.719
Or then like we had something happen with the dryer, and we were like, oh no, are we gonna be able to fix it ourselves?

00:02:24.879 --> 00:02:31.439
And y'all, I will say one thing about Brandon, he loves him some YouTube university, and we were fine.

00:02:31.680 --> 00:02:33.520
And I'm very, very grateful.

00:02:33.599 --> 00:02:34.879
But like it's always something.

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If it's not the car, then it's an appliance.

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If it's not an appliance, it's a pet.

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If it's not a pet, it's a it's always something.

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And we all know this to be true.

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And then on top of that, we have rising costs of everything, mass layoffs happening all over the place, job uncertainty.

00:02:51.840 --> 00:03:00.639
Like it is just, I feel like we're constantly just on edge, waiting for the next thing to happen because it's it always feels like it's right around the corner.

00:03:00.960 --> 00:03:06.319
Well, the thing is too, is that an emergency fund is one of the foundational building blocks of a financial plan.

00:03:06.560 --> 00:03:12.719
You know, a lot of the times people think about, I think the thing, honestly, I think the main thing that when people hear the word financial planning, they think about investing.

00:03:12.800 --> 00:03:13.039
Yeah.

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And investing is a long term.

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Like you're not going to get rich tomorrow or even next year off of investing for 99.999% of people.

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All right.

00:03:22.400 --> 00:03:27.759
So emergency fund is a key fundamental part because emergencies happen all the time.

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So you need to build this up so that the rest of your plan works.

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Because if you can't get through an emergency tomorrow, you know, say if something happens, you need a thousand, two thousand dollars, you can't get through that emergency tomorrow.

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What good does, you know, investing that's actually going to take you 20, 25 years to get to your goal?

00:03:42.719 --> 00:03:45.919
What good is that when you can't get through an emergency that could happen tomorrow?

00:03:46.240 --> 00:03:46.560
Right.

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Well, and it's, you know, I mean, so much of this, and I hate to say it, is just not fun.

00:03:53.439 --> 00:03:56.960
No, I mean it's just not it's not a fun way.

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It's not fun to put away money.

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You have to budget for your emergency fund, right?

00:04:02.159 --> 00:04:06.240
Isn't it it is an expense to put away money for savings.

00:04:06.400 --> 00:04:06.639
Yes.

00:04:06.879 --> 00:04:07.520
That's what it is.

00:04:07.599 --> 00:04:08.719
You have to look at it that way.

00:04:08.800 --> 00:04:13.360
It is an expense, just like your water bill, just like your light bill, just like your car insurance.

00:04:13.680 --> 00:04:18.800
You have to plan for it, you have to put it away, and it's it's an expense that you need to account for.

00:04:18.879 --> 00:04:30.879
But just like, I mean, I don't, even though I know future Jeffs will thank me, I don't love seeing money come out of my paycheck for anything, whether it's taxes, whether it's social security, definitely not social security.

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I'm like, give me my money back, you know, whether it's my going towards my 401k, like I don't like seeing any money come out of my paycheck, but I know that it's it's like that necessary evil.

00:04:43.839 --> 00:04:44.000
Yeah.

00:04:44.079 --> 00:04:51.759
And the thing is, like, you know, the first step as far as for an emergency fund is you need to make sure you understand what emergency fund is for and what it's not for.

00:04:51.920 --> 00:04:52.639
Ooh, tell us.

00:04:52.800 --> 00:04:53.519
That's the first step.

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So define what an actual emergency is.

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And we've already talked about a few of them, you know, job loss, medical issues, you know, urgent repairs to say your home, your car, things of that nature.

00:05:04.000 --> 00:05:10.319
Now, what an emergency fund is not for is vacations, gifts, the cute boots that are on sale.

00:05:10.480 --> 00:05:12.800
And then even in a scenario, a planned expense.

00:05:12.959 --> 00:05:19.199
So, for example, like if you're wanting to do a home repair in a year or two from now, you could start, don't go into your emergency fund.

00:05:19.360 --> 00:05:20.240
Start to plan for that.

00:05:20.480 --> 00:05:22.240
It's not something that's urgent and just popped up.

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This is more of a want and something you want to do.

00:05:24.560 --> 00:05:25.199
Plan for it.

00:05:25.360 --> 00:05:31.120
The emergency fund is for those things that pop up that are unexpected and you need to address immediately.

00:05:31.439 --> 00:05:36.480
I feel like you said that because I want to get the house painted and our quote was$2,750.

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That isn't why I said that.

00:05:38.480 --> 00:05:39.600
I wasn't even thinking about that.

00:05:39.759 --> 00:05:40.959
But that does make sense.

00:05:41.040 --> 00:05:43.279
That does fall into that because that could be a planned expense.

00:05:43.439 --> 00:05:47.680
It's a planned expense, not an I mean, yeah, in my head, I'm like, but we have it.

00:05:47.759 --> 00:05:48.959
We can just move the money.

00:05:49.040 --> 00:05:50.720
But no, that's not what that's for.

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And getting the house in the painted interior is not an emergency.

00:05:55.519 --> 00:06:10.160
And the main reason behind defining what an actual emergency is and what is not an emergency is because when you're in the process of funding an emergency fund, if you're constantly using the money for things that aren't emergencies, then you kind of feel deflated.

00:06:10.240 --> 00:06:12.240
You're like, what is the purpose of this emergency fund?

00:06:12.399 --> 00:06:13.120
It feels pointless.

00:06:13.199 --> 00:06:14.879
It's like, yeah, because you're not doing it right.

00:06:15.839 --> 00:06:17.120
You're doing it wrong.

00:06:17.519 --> 00:06:22.000
Yeah, but people have a hard time taking money from their emergency fund even when they have emergency.

00:06:22.319 --> 00:06:23.120
That is true as well.

00:06:23.360 --> 00:06:36.879
You have people on one side and you could completely swing the pendulum to the other side, where you have people that are such Uber savers that, you know, when a proper emergency does happen, they're hesitant to use their emergency fund or they feel deflated because they're having to use their emergency fund.

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We're like, this is what it was for.

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This is what you this is This is what this specific bucket was for.

00:06:41.839 --> 00:06:42.480
Yeah.

00:06:43.040 --> 00:06:47.120
Okay, so let's go into kind of the basics.

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Where should people start?

00:06:49.519 --> 00:06:52.720
Well, first you determine how much you should have in your emergency fund.

00:06:52.879 --> 00:06:53.199
Okay.

00:06:53.439 --> 00:07:00.079
And you know, an easy rule of thumb could be, you know, anywhere from six to twelve months worth of expenses.

00:07:00.319 --> 00:07:02.639
Now, listen to when I say expenses.

00:07:02.720 --> 00:07:04.079
I didn't say income.

00:07:04.399 --> 00:07:04.639
Okay.

00:07:05.199 --> 00:07:07.279
Six to twelve months worth of expenses.

00:07:07.519 --> 00:07:12.639
Now, where the nuance comes is individual circumstances and your personal feelings.

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So, for example, um, are you a dual income household that, you know, if one person loses a job, maybe the other person can still cover most of the bills?

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That will make a difference in regards to how much you need.

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Are you a family of four and you're have a single income where everybody is dependent upon one income?

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Then you might want to have a little bit more in your emergency fund than that six months and lead closer to that 12 month.

00:07:34.399 --> 00:07:37.040
Um, are you a business owner, an entrepreneur?

00:07:37.120 --> 00:07:39.279
You might want to have a little bit more in your emergency fund.

00:07:39.439 --> 00:07:42.879
Are you someone that's in an industry that has high turnover?

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Maybe you want to have more in your emergency fund.

00:07:45.199 --> 00:07:47.040
And then also just comes personal preference.

00:07:47.120 --> 00:07:55.680
You know, someone might just want to have a little bit more, like based upon their needs, maybe they only need six months, but like their comfort level is like maybe I need eight or nine.

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I just feel more comfortable.

00:07:57.120 --> 00:07:58.879
So you can have that nuanced conversation.

00:07:59.040 --> 00:08:05.120
But the first thing is determining how much do you need, because that's going to be the goal that you set up for funding it.

00:08:05.279 --> 00:08:16.079
So you determine what is my ultimate goal, and then you simply can just do the math based upon your budget on how much you can contribute on a monthly basis towards that goal and how long it would take you to get there.

00:08:17.040 --> 00:08:25.040
I think one another call out too is depending on what your where your income comes from, are you an entrepreneur?

00:08:25.199 --> 00:08:28.399
Are you, you know, in a volatile industry?

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Like I work in tech, and every single day, you know, that I log into LinkedIn, I see that, you know, another company's done mass layoffs.

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So if you know that you're in a field where it's going to be difficult to get rehired, things are taking significantly longer than they used to, you might want to add a little bit of extra padding in because you want to account for that nuance of the industry that you're in.

00:08:56.720 --> 00:09:02.399
Now, if you're you might be in an industry where maybe it's super niche, you can get hired the next day somewhere else.

00:09:02.559 --> 00:09:04.799
You know, that's amazing and that's great.

00:09:04.879 --> 00:09:08.159
But those are all things I think that you need to consider.

00:09:08.639 --> 00:09:08.960
Yeah.

00:09:09.279 --> 00:09:15.600
And I think we also need to, you know, dispel some of the myth out there because like what?

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$1,000 is not an emergency fund.

00:09:17.919 --> 00:09:18.879
It's a starter fund.

00:09:18.960 --> 00:09:19.279
Oh, yeah.

00:09:19.519 --> 00:09:20.960
But that is not an emergency fund.

00:09:21.200 --> 00:09:26.879
That is a place where you can maybe start, but most emergencies are going to cost you more than$1,000.

00:09:27.360 --> 00:09:27.600
Right.

00:09:27.840 --> 00:09:29.279
Now, what I do unfortunately.

00:09:29.360 --> 00:09:29.440
Yeah.

00:09:29.600 --> 00:09:36.399
But what I do want to preface with that is that the main issue when it comes to having an emergency fund is not having too little of emergency fund.

00:09:36.559 --> 00:09:38.639
It's actually waiting too long to even start one.

00:09:39.679 --> 00:09:46.559
So even though I'm talking about$1,000 is not a fully funded emergency fund, it is a starting place and it's better than nothing.

00:09:46.720 --> 00:09:55.840
So even if you don't have a lot to start putting towards an emergency fund, put something in place because it's going to be significantly better to have something than it is to have nothing.

00:09:56.159 --> 00:09:56.399
Yeah.

00:09:56.480 --> 00:10:03.600
So don't be the person that says, well, I can't put a$500 or$1,000 into the emergency fund every month.

00:10:03.679 --> 00:10:05.279
So I'm just not going to do anything.

00:10:05.519 --> 00:10:10.720
Instead, be the person that says, hey, I have$20 that I can put into this emergency fund this month.

00:10:10.879 --> 00:10:12.000
That's what I'm going to do.

00:10:12.240 --> 00:10:14.559
Or, hey, this expense was less than I thought.

00:10:14.639 --> 00:10:16.080
So I have a little bit of money left over.

00:10:16.240 --> 00:10:18.799
I'm going to add this to my emergency fund.

00:10:19.120 --> 00:10:32.159
And also, like a little bit of a sidebar here with that is the main purpose of the emergency fund is obviously to fund an emergency, but the even further step is so that you can fund it fund an emergency so that you don't go into debt.

00:10:32.480 --> 00:10:32.960
Right.

00:10:33.200 --> 00:10:40.159
So that's one of the main reasons is that, like, you know, if you don't have a properly funded emergency fund, maybe you have to take out a loan for something that's unnecessarily in.

00:10:40.240 --> 00:10:41.919
Maybe their rates aren't favorable to you.

00:10:42.080 --> 00:10:45.039
You might actually end up racking more credit card debt in that scenario.

00:10:45.200 --> 00:10:52.159
So the emergency fund is plays a bigger part in the financial picture than just, you know, having this lump sum of money sitting there.

00:10:52.399 --> 00:10:52.799
Right.

00:10:53.120 --> 00:10:59.519
And speaking of having the money sitting there, your emergency fund should be sitting in a high yield savings account.

00:10:59.759 --> 00:11:01.679
We will link our favorites.

00:11:01.759 --> 00:11:06.080
Um the rates kind of are not as great as they were last year.

00:11:06.399 --> 00:11:10.000
Still better than your, you know, standard brick and mortar old school bank.

00:11:10.399 --> 00:11:17.759
If your money is sitting at the Wells Fargo and the Bank of America's and even, you know, at Chase or wherever, you are losing money.

00:11:17.919 --> 00:11:21.120
So get at least right now, it's like about three and a half percent.

00:11:21.279 --> 00:11:25.600
Sometimes it's up to last year, we were getting mid-fours, which was really nice.

00:11:26.000 --> 00:11:28.399
You need to keep it in a high yield savings account.

00:11:28.639 --> 00:11:30.159
There no other place you should have.

00:11:30.399 --> 00:11:31.039
Non-negotiable.

00:11:31.120 --> 00:11:31.919
We'll link our favorite.

00:11:32.240 --> 00:11:42.000
Because also the thing is here is that the problem that I also often run into is that people need to visualize their various buckets of money to have different purposes.

00:11:42.320 --> 00:11:48.879
Because what ends up happening is that people sometimes are always trying to maximize and they're viewing all their buckets together in regards to maximizing.

00:11:48.960 --> 00:11:50.559
And by maximizing, I mean growth.

00:11:50.879 --> 00:11:53.440
The emergency fund bucket is not meant for growth.

00:11:53.600 --> 00:11:55.279
So you need to get that out of your mind.

00:11:55.440 --> 00:11:56.639
It is not a growth bucket.

00:11:56.720 --> 00:11:58.000
That is not your investing bucket.

00:11:58.080 --> 00:12:01.440
It's not too many people that are like, oh, you know, I want to invest some of that or whatever.

00:12:01.600 --> 00:12:03.679
I'm like, well, then it's not your emergency fund bucket.

00:12:03.840 --> 00:12:05.039
That's your investment bucket.

00:12:05.200 --> 00:12:11.759
The emergency fund bucket is there for the emergency, rainy day, something happens and it's urgent.

00:12:12.240 --> 00:12:13.440
This is not meant to invest.

00:12:13.600 --> 00:12:21.360
Because also people need to take into account that when it comes to investing, the basic rule of thumb is if you need it in five years or less, you probably shouldn't invest it.

00:12:21.519 --> 00:12:22.000
All right.

00:12:22.240 --> 00:12:28.799
Because the idea with the emergency fund, if you invest it and then say, you know, the market's down and now you need money, now you have less money.

00:12:29.519 --> 00:12:36.399
So you need to really think about the specific purpose of um each bucket of money that you have and not conflate them all together.

00:12:36.720 --> 00:12:37.279
Right.

00:12:37.919 --> 00:12:38.720
I like that.

00:12:38.799 --> 00:12:44.639
I because people do get confused or everybody's in the maximizing, maximizing mindset.

00:12:44.960 --> 00:12:51.200
And you're right, that's not what the emergency fund is for, because it is not an investment of any kind.

00:12:51.279 --> 00:12:52.240
It's not an investment vehicle.

00:12:52.399 --> 00:12:53.600
No, it's not an investment, period.

00:12:53.679 --> 00:12:53.840
Yeah.

00:12:54.159 --> 00:12:56.159
That's not the purpose of your emergency fund bucket.

00:12:56.240 --> 00:12:56.320
Yeah.

00:12:56.480 --> 00:13:05.039
And I've had that, like and the conversation comes up more often than not because once you have a decent income and you have more expenses that you're trying to cover, you're going to have a higher emergency fund.

00:13:05.200 --> 00:13:10.240
So sometimes people are like, you know, I hate seeing$60,000,$70,000 sitting there.

00:13:10.480 --> 00:13:11.679
And I could be investing.

00:13:11.759 --> 00:13:14.480
And I'm like, that's not the purpose of this bucket.

00:13:14.639 --> 00:13:18.960
And you need to, you know, wrap your mind around, where you shape your mind around that.

00:13:19.120 --> 00:13:25.039
Because most of the time, too, is that like, you know, normally most people's investment vehicles have restrictions to access.

00:13:25.279 --> 00:13:31.279
So if you have this money someplace else and you have a restriction to access it, that even that presents another presents another issue.

00:13:31.440 --> 00:13:31.600
Yeah.

00:13:31.840 --> 00:13:41.360
So it's really, you know, the proper mindset and thinking about everything from a planning standpoint as a whole picture and not just an individual segment of it.

00:13:42.399 --> 00:13:45.279
For people who are listening who are like, yep, you're right.

00:13:45.440 --> 00:13:47.279
I need to start my emergency fund.

00:13:47.679 --> 00:13:52.399
How do you recommend people get started to where it doesn't feel overwhelming?

00:13:52.799 --> 00:13:59.360
This all starts back to the basics of pretty much every conversation we have is understanding your budget.

00:13:59.519 --> 00:13:59.759
Okay.

00:14:00.000 --> 00:14:09.440
Understanding your cash flow, how much money you have coming in, how much money you have going out, and where can you maybe reallocate some of that money to better benefit your goals.

00:14:09.759 --> 00:14:15.919
So you want to understand how much can I comfortably um contribute to an emergency fund on a monthly basis?

00:14:16.080 --> 00:14:20.480
And the only way you're going to know how much you can comfortably contribute is by understanding your budget.

00:14:20.639 --> 00:14:20.960
Okay.

00:14:21.120 --> 00:14:22.000
There's no way to do it.

00:14:22.080 --> 00:14:24.320
Because, like, I don't like the idea of just guessing.

00:14:24.559 --> 00:14:28.399
Because, for example, normally in guessing, you're probably undershooting.

00:14:28.639 --> 00:14:28.879
Yeah.

00:14:29.039 --> 00:14:33.759
Because if you're like, oh, I can contribute 200 and you're doing it, more than likely you can contribute more.

00:14:34.000 --> 00:14:34.720
That's true.

00:14:35.039 --> 00:14:42.159
So you want to really take a look at where all your money is going and have a specific amount that you know you can contribute in pushing that.

00:14:42.240 --> 00:14:52.399
Because also the thing is, too, is when you're deciding how much you can contribute on a monthly basis, you can obviously then do the math based upon what you're currently contributing, how long it's going to take for you to have a fully funded emergency fund.

00:14:52.799 --> 00:14:56.639
And if you want to, you know, speed up that process, then you're going to need to contribute more.

00:14:57.039 --> 00:15:01.519
But it all comes back to determining how much you can contribute by looking at your budget.

00:15:01.679 --> 00:15:07.679
Now, with that being said, if you only have$25 to contribute,$20 to contribute, do that.

00:15:08.320 --> 00:15:10.080
It is better than doing zero.

00:15:10.159 --> 00:15:15.440
And I cannot stress enough that something is a thousand times better than nothing.

00:15:16.080 --> 00:15:17.919
And that's where people need to get that head trash out.

00:15:18.000 --> 00:15:19.200
They're like, oh, I don't have enough.

00:15:19.360 --> 00:15:20.320
I can't really do anything.

00:15:20.399 --> 00:15:21.440
I don't care if it's$5.

00:15:22.240 --> 00:15:24.000
$5 is better than nothing.

00:15:24.240 --> 00:15:26.639
Well, and you talk a lot about building the habit.

00:15:26.799 --> 00:15:27.039
Yes.

00:15:27.200 --> 00:15:30.639
So right now it might be$5 and you can do that monthly.

00:15:30.799 --> 00:15:34.000
You can automate, you know, we're big on automate, automate what you can.

00:15:34.080 --> 00:15:37.039
So that way it's not another manual task that you have to do.

00:15:37.200 --> 00:15:45.120
So, you know, whether it's coming straight from your paycheck, once it hits your, you know, your account, maybe you have it automatically coming out on the same day every month, et cetera.

00:15:45.279 --> 00:15:53.120
But you're building that habit and working that muscle of learning how to automate your savings.

00:15:53.360 --> 00:15:53.679
You know?

00:15:53.840 --> 00:15:55.360
And I think automating is the key.

00:15:55.440 --> 00:16:04.399
It's like once you've looked through your budget and you determine how much you can comfortably contribute to it on a monthly basis, automate it to make it so much easier for you and also to ensure that it happens.

00:16:04.559 --> 00:16:04.720
Yeah.

00:16:04.879 --> 00:16:09.120
Now, for example, people that maybe have a regular income, that might be a little bit more difficult.

00:16:09.279 --> 00:16:18.720
But we've also had other episodes where we talk about where maybe you do a little bit less that you know you can do, and then you might have to contribute additional amounts manually when they come in.

00:16:18.799 --> 00:16:29.200
So, for example, like, you know, if you're someone that works in um a sales position, when you have your commission, your bonuses, maybe you're putting more from those into the emergency funds, but you have to do that manually.

00:16:29.360 --> 00:16:38.320
But then even, you know, for example, you know, those individuals that are getting larger tax refunds, using that strategically to put towards, you know, building up your emergency fund as well.

00:16:38.559 --> 00:16:38.879
Yes.

00:16:39.039 --> 00:16:40.639
Oh my gosh, the tax refunds.

00:16:40.720 --> 00:16:43.759
Yeah, please don't go on a shopping spree with those.

00:16:43.919 --> 00:16:47.679
I mean, that's a whole nother episode of what you can do with your tax refund.

00:16:47.919 --> 00:16:54.320
But yeah, and and one thing that we we had an episode on earlier this year already is Monarch money.

00:16:54.480 --> 00:16:56.559
We are loving, loving, loving Monarch.

00:16:56.720 --> 00:16:59.120
They are not paying us to say that yet.

00:17:00.639 --> 00:17:02.720
Uh, hey Monarch, holler at us.

00:17:02.879 --> 00:17:04.079
Uh, we love your app.

00:17:04.240 --> 00:17:09.440
But Monarch is great, great user interface, great user experience, super easy to set up.

00:17:09.599 --> 00:17:15.839
You can put all of your accounts in and have a really clean picture of the money that's going in, the money that's coming out.

00:17:16.000 --> 00:17:19.359
Um, and it'll help you not have to do it manually, right?

00:17:19.519 --> 00:17:21.839
Because nobody well, I don't want to live in a spreadsheet.

00:17:21.920 --> 00:17:23.200
That's not how I like most people don't.

00:17:23.440 --> 00:17:24.559
No, there are some of the weirdos out there.

00:17:24.799 --> 00:17:26.400
There are people, no, there are people who are.

00:17:26.559 --> 00:17:28.000
I have some clients that love their spreadsheets.

00:17:28.240 --> 00:17:28.640
Yes, yes.

00:17:28.799 --> 00:17:29.279
And that's fine.

00:17:29.359 --> 00:17:31.359
You do you, but they also use Monarch.

00:17:31.440 --> 00:17:32.240
So they like that as well.

00:17:32.480 --> 00:17:32.640
Yeah.

00:17:32.799 --> 00:17:43.440
And then, I mean, you know, you can look at your cash flow that way and then determine what you can put into your high yield savings account for your emergency fund.

00:17:43.680 --> 00:17:51.200
I do want to go back and ask you as people are looking at their expenses, because this is for an emergency.

00:17:51.359 --> 00:18:01.039
If we're thinking about a layoff, are you calculating expenses for how we're living now with like our housekeeper and the Netflix and the Hulu and the this and the that?

00:18:01.119 --> 00:18:03.039
Or are you extracting?

00:18:03.359 --> 00:18:04.240
So you can tier it.

00:18:04.400 --> 00:18:04.640
Okay.

00:18:04.799 --> 00:18:07.920
So for example, you can kind of determine what's bare minimum, right?

00:18:08.480 --> 00:18:10.000
You could yeah, you could determine your bare minimum.

00:18:10.079 --> 00:18:13.119
So let's just say hypothetically your bare minimum is 40,000.

00:18:13.200 --> 00:18:21.039
So you have that first set goal of like this is the bare minimum to, you know, have the basics of all the things we need, like, you know, our utilities, mortgage, stuff like that.

00:18:21.119 --> 00:18:21.279
Yeah.

00:18:21.759 --> 00:18:28.960
Then you can have a second tier where like, oh, you know, you know, instead of 40, you know, 50,000 is gonna allow us to keep, you know, the luxuries, the gym membership.

00:18:29.359 --> 00:18:36.319
And then our 60,000 is gonna allow us to really kind of keep the standard life that we have and not have to necessarily worry for a certain period of time.

00:18:36.480 --> 00:18:41.440
So you can tier it, but like I said, it's first of all defining, you know, what you want that emergency fund to look like.

00:18:41.599 --> 00:18:41.920
Yep.

00:18:42.240 --> 00:18:51.279
And that's gonna that can vary because some people are, I mean, one of the biggest things is that most people are like, you know, well, if you know, if I we both get laid off or something like that, then like obviously we're gonna go bare bones.

00:18:51.519 --> 00:18:51.759
Right.

00:18:52.000 --> 00:18:57.119
But then sometimes you might have to be who you are real as a person, is are you gonna be able to just go straight bare bones?

00:18:57.279 --> 00:18:57.920
Right, right.

00:18:58.240 --> 00:19:04.559
So you had you can like you can tailor that to each individual, and there's some nuance there.

00:19:04.880 --> 00:19:12.000
Well, and as a, we did an episode a while back because I was part of a mass layoff at a Fortune 100 tech company.

00:19:12.160 --> 00:19:14.160
Um, I did end up on garden leave.

00:19:14.240 --> 00:19:16.400
I had, you know, a very nice severance.

00:19:16.480 --> 00:19:17.759
I was very grateful.

00:19:18.079 --> 00:19:26.559
But we, our goal was honestly to try to not use the severance and to take that money and put it into our emergency fund.

00:19:26.880 --> 00:19:36.079
Um, however, we were kind of thinking about okay, what can what could we get rid of versus what maybe luxuries would we keep?

00:19:36.240 --> 00:19:45.920
And one of the things that we landed on was we're gonna keep our housekeeper because, you know, I was gonna be job searching, I was gonna be interviewing, I was gonna be prepping, et cetera.

00:19:46.160 --> 00:19:50.880
And I can't do anything mentally in a house that is not the way I need it to be.

00:19:51.119 --> 00:20:02.720
And so keeping our housekeeper was going to ultimately benefit me in my job search and in my, you know, mental capacity and mental planning and all of those things.

00:20:02.960 --> 00:20:06.960
And so I think even thinking through those things, like I can go without TV.

00:20:07.039 --> 00:20:09.839
We barely watch TV anyways, but I need a clean house.

00:20:10.079 --> 00:20:11.680
And the key thing is we talked about it.

00:20:11.759 --> 00:20:12.000
Yeah.

00:20:12.160 --> 00:20:15.359
So we talked about it and had a plan in place for what that would look like.

00:20:15.680 --> 00:20:19.599
And we built our emergency fund and our plan of action around that.

00:20:19.680 --> 00:20:19.759
Right.

00:20:20.079 --> 00:20:27.119
Like you said, you know, that's a good point to bring up when it comes to the emergency fund is also what type of severance package are you for the most part?

00:20:27.200 --> 00:20:34.880
I'm not gonna say guaranteed because there's always that possibility, but what is a strong possibility of if you did get laid off from your job, do you have a you know a severance package?

00:20:35.359 --> 00:20:36.559
Or what does your contract say?

00:20:36.720 --> 00:20:38.880
Are you getting one month for every year of service?

00:20:39.039 --> 00:20:42.559
Are you do you know you're gonna get automatic six months right out the gate?

00:20:42.720 --> 00:20:50.640
I mean, you know, what I still like to do in those scenarios is that I still like to base it upon, because like I said, none of those are guaranteed.

00:20:50.799 --> 00:20:51.039
Right.

00:20:51.119 --> 00:20:51.680
They're nice to have.

00:20:51.920 --> 00:20:57.519
Because like I said, you could have an amazing severance package that's in your contract, but if the company goes under, it doesn't matter.

00:20:57.680 --> 00:20:58.240
They don't have the money.

00:20:58.720 --> 00:20:58.880
Yep.

00:20:59.039 --> 00:21:04.079
So I always like to base it off of even if you have a severance package, let's build it as if you don't.

00:21:04.240 --> 00:21:04.559
Yes.

00:21:04.720 --> 00:21:14.400
And then if something does happen and you do get laid off, you have the emergency fund and you have some extra, but then also we could just bank some of that money to do something else with once you find another job.

00:21:14.480 --> 00:21:14.720
Yeah.

00:21:14.880 --> 00:21:19.200
So having a little bit more an emergency fund is never going to be terrible in comparison to not having enough.

00:21:19.359 --> 00:21:19.680
Right.

00:21:19.839 --> 00:21:20.400
Exactly.

00:21:20.559 --> 00:21:21.519
Exactly.

00:21:21.839 --> 00:21:27.119
I feel like we covered most of the the like the meat.

00:21:27.359 --> 00:21:28.559
Are we missing anything?

00:21:28.799 --> 00:21:33.839
Um, I wouldn't, like I said, we've already talked about like the main thing as far as where you need to keep it.

00:21:34.240 --> 00:21:35.200
I know savings.

00:21:35.519 --> 00:21:36.480
Because I've I have met people.

00:21:37.279 --> 00:21:39.359
I have met people who have kept it in their checking account.

00:21:39.599 --> 00:21:40.640
Oh my gosh.

00:21:41.680 --> 00:21:42.799
In your check, I listened.

00:21:43.119 --> 00:21:46.960
Or just like a regul or even just like a regular savings account where you're getting like 0.02%.

00:21:47.200 --> 00:21:50.240
And I'm like, uh but you know.

00:21:50.559 --> 00:21:50.799
Cool.

00:21:50.880 --> 00:21:54.400
Let's just very briefly, I'm gonna give you like a minute on this.

00:21:55.599 --> 00:21:59.759
What about the people who have too much in their savings?

00:22:00.480 --> 00:22:00.720
Yeah.

00:22:00.960 --> 00:22:05.519
So I did say before, like, you know, having too much is not going to be bad.

00:22:05.599 --> 00:22:06.400
It's not bad.

00:22:06.559 --> 00:22:06.880
Okay.

00:22:07.039 --> 00:22:08.799
It's better than not having enough.

00:22:09.039 --> 00:22:16.319
However, then it comes into the play where now your money could possibly have been better allocated to grow for you.

00:22:16.480 --> 00:22:23.200
So for example, if we've let's say we're even on the, you know, the further end, you get a 12 months, 12 months of expenses.

00:22:23.359 --> 00:22:27.759
Let's just say that equals$100,000, but you have$250,000 sitting there.

00:22:28.240 --> 00:22:35.519
And you don't have and you don't have anything specific that you're going to do with that additional$150,000 in the next five years.

00:22:36.160 --> 00:22:39.200
Now that money is really just losing purchasing power.

00:22:39.279 --> 00:22:47.039
And what I mean by that is that in order for your dollar today to be worth the same dollar a year from now, it needs to keep up with inflation.

00:22:47.359 --> 00:22:52.160
Now with a high yield savings account, you're going to get the highest interest rate you really can on safe money.

00:22:52.240 --> 00:22:56.720
And by safe money, I mean you're not, you don't have a potential of losing it, but you're not going to keep up with inflation.

00:22:57.039 --> 00:22:58.400
Inflation is still going to be a little bit higher.

00:22:58.480 --> 00:23:02.960
So you're still quote unquote losing a little bit of money, but you're trying to minimize the amount that you're losing.

00:23:03.200 --> 00:23:11.680
But if you have an additional$150,000 that was just sitting there, you were just losing money because you could have invested that in that time frame and it could have grown for you significantly more.

00:23:12.480 --> 00:23:27.119
Well, and especially, I think the important part there is there are people who need$250,000 or$300,000 in their emergency fund because they have multiple properties or, you know, like if that is part of what they need for their expenses, then great, have that.

00:23:27.440 --> 00:23:32.799
But if that is not what your expenses need, then you're ultimately losing money.

00:23:32.960 --> 00:23:33.119
Yeah.

00:23:33.279 --> 00:23:35.839
You could like I said it would be better sort of to invest that.

00:23:36.160 --> 00:23:37.279
What a good problem to have though.

00:23:37.519 --> 00:23:39.920
But then also, like, I would look at the psychology behind it.

00:23:40.559 --> 00:23:47.119
You might have to do some internal digging to understand, like, if you possibly know that you don't need this much money or literally support it.

00:23:47.359 --> 00:23:48.799
But you still have it there, why?

00:23:49.680 --> 00:23:57.759
And you need to address that because I like I said, we always talk about also we're big on the behavioral finance aspect, not just the you know, the black and white numbers.

00:23:57.920 --> 00:24:01.440
Like, why are you doing what you do with your money or why are you not doing what you should be doing with your money?

00:24:01.599 --> 00:24:01.680
Yeah.

00:24:01.920 --> 00:24:02.559
So you might need to look at that.

00:24:05.920 --> 00:24:11.839
Um, that you can go back and listen to because you know, there's so much more to our money than just the numbers.

00:24:11.920 --> 00:24:17.599
Aaron Powell But at the end of the day, I'd much rather have that problem where I have too much money than one than I don't have any or I don't have enough.

00:24:18.079 --> 00:24:22.960
We're not feeling sorry for you if you have$300,000 sitting in savings and you're like, oh, I don't know what to do.

00:24:23.440 --> 00:24:28.880
Also, one additional call I want to make for individuals is that, like we said, you should have it in your high high yield savings account.

00:24:28.960 --> 00:24:33.440
But one of the things I often run across is like, oh, well, should I have multiple high-yield savings accounts?

00:24:33.519 --> 00:24:36.720
Because you know, I have one for my emergency fund, but then I have for my other savings.

00:24:36.799 --> 00:24:42.640
And I'm like, in all honesty, what you should do is choose a high-yield savings account such as Ally, which allows you to bucketize.

00:24:42.799 --> 00:24:48.880
So you don't need multiple high yield savings accounts, but you can have one and it has sub-accounts and you can name the sub accounts.

00:24:48.960 --> 00:24:57.599
So, for example, if you have$100,000 in total in the account and you're like, I need a$70,000 emergency fund, you can have$70,000 as a bucket for your emergency fund and have it labeled.

00:24:57.759 --> 00:24:59.039
You can clearly see it as separated.

00:24:59.119 --> 00:25:04.720
And then the other$30,000, like, you know, I have$20,000 for a home improvement, I have$10,000 for my kids' braces.

00:25:04.880 --> 00:25:07.359
And you can honestly bucketize those and label them.

00:25:07.519 --> 00:25:28.480
And I honestly, it sounds silly, but literally that little change, I've done it for so many clients, and it's like life-changing for them to just be able to see, instead of seeing a large lump sum of money and having to internally in their mind determine what the amounts are for, as compared to simply seeing it clearly on on the computer screen that like, this is what this bucket's for, this is what this bucket's for.

00:25:28.640 --> 00:25:32.799
You'd be surprised at how um much of a mental shift that can have for you.

00:25:33.119 --> 00:25:35.279
It's the little tweaks that make the biggest difference.

00:25:35.680 --> 00:25:35.839
Yeah.

00:25:36.000 --> 00:25:36.240
Yeah.

00:25:36.400 --> 00:25:38.720
Well, because seeing, let's say it is$100,000.

00:25:38.960 --> 00:25:42.480
Let's seeing$100,000 and you're like, well, what is that?

00:25:42.640 --> 00:25:46.960
Okay, that's emergency, that's the pet fund, that's the the the it's hard, right?

00:25:47.119 --> 00:25:52.799

126: How to Build an Emergency Fund That Actually Protects Your Family

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