The Emergency Fund Revolution

I haven’t always been wise with money and I still occasionally get side-tracked and make a few minor mistakes that serve as a reminder to be smart about how I manage my dollars and cents! While reading “Le Zahir” on the Greyhound ride from Sudbury to Ottawa this week, there’s a passage about freedom that made me nod my head in recognition of the heavy truth associated with the narrator’s thoughts:

 “J’entendais les gens parler au nom de la liberté (…). Esclaves du luxe, de l’apparence du luxe, de l’apparence de l’apparence du luxe. Esclaves d’une vie qu’ils n’avaient pas choisie, mais qu’ils avaient décidé de vivre parce que quelqu’un avait fini par les convaincre que cela valait mieux pour eux. Et ainsi leurs jours et leurs nuits se suivaient et se ressemblaient, l’aventure était un mot dans un livre ou une image à la télévision toujours allumée, et quand une porte s’ouvrait, ils disaient toujours: ‘Cela ne m’intéresse pas, je n’ai pas envie.’”

(In English) “I heard people talk about ‘freedom’. Slaves of luxury, of the appearance of luxury, of the appearance of the appearance of luxury. Slaves of a life that they had not chosen but that they decided to live because someone had convinced them that it was best for them to live this way. And so their days and their nights all look alike, adventure being something read in a book or seen on a television that is always on and when an opportunity presents itself, they always say: ‘I’m not interested, I don’t feel like it’.”

 

This really struck a chord with me because it’s the one thing that I’ve committed myself to for the past couple of years: to live a life of choice. When I realized that I was tired of working jobs that I hated, I researched the best way to break the shackles of these daily routines that I just couldn’t stand anymore.

I read a ton of books and eventually started an entire financial library on my bookshelf. I also regularly read the following blogs:

http://www.milliondollarjourney.com/
http://www.canadiancapitalist.com/
http://blog.canadian-dream-free-at-45.com/
http://www.getrichslowly.org/blog/

Here’s a few things I learned to achieve a bit of financial independence:The first step? Put some money aside. The first financial book I read was The Wealthy Barber

It’s there that I read about the concept of setting aside at least 10% of your gross income each paycheque. The best place to save it? A high-interest savings account that you don’t have immediate access to. Preferably one that you can’t access through a debit card. In my case, I opened an account with ING Direct and never ordered a card. If I wanted to take money out, I had to transfer it to my chequing account at a different bank. The process could take a couple of days. This way, I could prevent any impulse buying with my savings!

The next step? Get out of debt. Most people think that this is number one but it won’t get you very far if you happen to get laid off or fired or perhaps even injured and can’t work. I’d rather live with some debt than have absolutely no cash set aside for an emergency. If you think that the social nets will catch you, think again. You could be without pay for as long as five weeks if you happen to become ill and have to go on short-term leave (it happened to me). No one wants to have to make credit card payments when there’s no income coming in, so that’s the number one debt to cross off your list.  What I’ve done in times of debt is reduce my savings payments to myself from 10% to anywhere between 5% and 8%. This way, I’ve been able to eliminate debts with a bit more money at hand but still manage to invest in my savings. The last rule I’ll share about debt is simply: always, always pay more than the minimum payment!

There are numerous resources out there to help out with debt and I highly recommend the book Your Money Or Your Life to help get your finances in order.

Related posts:

1. It’s not about the money, it’s about freedom.
2. ING Direct: great leadership, great ideas