Do You Want Illiminate Emergencies from Your Life? Then Prepare for Them.

Today I woke up at 0520 and went for a 6 mile run. I ran 3 miles and then did 1 minute intervals for the next 3 miles. My run was slow but it was good, however at about 5.5 mile my left knee started to hurt and the last .25 mile was very slow. After that I rode my bike 12.5 miles to work and at the 4 mile mark I got a flat. That was the first flat tire in over a year. It was a good thing that I always carry a spare tube and CO2 on my bike for just such an occurrence.  I can’t call it an emergency because I had everything that I needed to take care of the situation so it was not an emergency. It was just an inconvenience because it took me longer to get to work this morning and I have to replace my tube and CO2 cartridge. There is an important message in this morning’s events because if we are prepared then we have no need to worry about things and we can focus on our lives major objectives without getting completely derailed by minor set-backs.  This is the reason why I maintain an emergency fund that has no other purpose than to be there when an unforeseen financial situation comes up.  For example if your car breaks down and it cost you $1000 to repair it then you already have that money and you can simply get your car fixed and it will not hurt you financially. Going back to the flat tire this morning, it is vital that I replace my tube and CO2 cartridge it is extremely important that you replace the money that was used to fix your car so it will be there if and when you need to use your emergency funds in the future.

Your emergency fund should be equal to 3 to 6 month’s worth of expenses. You can determine how much money you need to set aside by creating a monthly budget. A budget is simply a document that outlines your monthly income and expenses, where your money comes from and where your money goes. A major key to financial success is to gain control over where your money goes once it comes into your coffers, because wealth is measured not in how much money make, rather it is measureed in how much money you keep.

One potential emergency that most people don’t like to think about is the loss of your income source (i.e. your job). That is why it is also important to create for yourself additional sources of income that are completely independent form each other which are passive and reoccurring in nature. Passive reoccurring income is income that comes into  your checking account on a reoccurring basis weekly, monthly, quarterly or yearly weather you work or not. The first objective would be to create monthly passive income that is greater than your monthly expenses. Once you do that you are now wealthy because if you lost your job it would not hurt you because your expenses are now covered by your passive income sources. If you keep your expenses low then it will be easier to achieve your passive income goal.

What kind of live would you be able to live if you had an emergency fund that was funded equal to 3 to 6 months of your monthly expenses and you had passive reoccurring income sources that were greater than your monthly expenses? Really think about that, because it is easier to achieve then most people think. It just takes a dream that has been developed into a workable plan that you breathe live into by taking action.   Take action today and start living the life that you have envisioned and dreamt about.