ADOPTING THE BABY STEPS: SAVING 3-6 MONTHS OF EXPENSES

courtesy of Emerald Frog Marketing

After placing an end to the old you, you are now ready to start building up your wealth. Being debt free is such a good start for investments but before working on your dreams, it would be better to make sure that you are secured for the immediate future. There is an immediate security that you need to fund on at times that future problems with your finances arise. This baby step is similar with building your emergency fund. The only difference is these problems can come but not that urgent although devastating. This is the problem of unemployment.

When someone gets laid off or retrenched or basically let go, the first thing that comes to mind is: "How am I gonna live now?" And for the family person ... "How will I support my family?" Unemployment occurs any time to any one despite excellent performance in the company. 

How to plan for the immediate expenses?

courtesy of Career Trend

In the Seven Baby Steps, it was very clear that you should be saving for 3-6 months expenses. However, would saving this much be enough until you can land to another job which will sufficiently support your family? The better thing to do is to check the chances of getting hired with equal or even better pay after computing your expenses. Don't just focus on the expenses, also think about the probability of landing to an equally paying job.

• Compute for your expenses, even at least the basic, which means wants are still not included. If you are confident that you can save even for those in the want list then there is no stopping you. However, if you would like to move on to the next Baby Step, it would be better to tighten your belt a little "to live like no else soon". 
• Now that you have an idea on how much you spend, you can start checking the length of time you are supposed to save this amount. There may be countries where it is easy to get back to a job like around 3 to 6 months, but there are also places where competition is high. Although there are some part time jobs to help you make ends meet for the meantime, your target is to get back to the old income level you once had or even better.

How to save for the contingency expense?

When you know how much and how long you are supposed to save, then it is easy to do the math and start the baby step. 

• Open another bank account to place your contingency fund. It is best to have an account which is not easily accessible such as bank accounts only using passbooks. Banks are surely closed on weekends which will hinder you to have impulse withdrawals on those days you go shop out with the family.
• If you find it troublesome to fall on queue every time you make a deposit, then you can still carry an account with a card but make sure you can discipline yourself never to touch the card for any other reason than for the unemployment contingency.

Read about the other baby steps.