Last summer my pool exploded. Not the whole pool luckily, just the in-ground pool light. It was the scariest thing ever – my son was about to jump in at the deep end. When he walked past the diving board, he noticed the flutter board was melted & burning. He reached down to grab it and the glass from the light exploded – there was a loud noise and a burst of flames. Luckily, he was not hurt, just really freaked out. The *what ifs* kept me up for a few nights afterwords.
Fear quickly turned to frustration – first at the insurance company who is not terribly interested in helping us – but then at ourselves for not being prepared financially for these kinds of emergencies. So, once again, I am giving you the benefit of my lack of experience without any actual hardship for you to endure. I am re-thinking my financial priorities and may need to shift how I allocate my funds (btw, I use this term quite loosely..it suggests that there are considerable amounts of money, just lounging around lazily by the pool, under the watchful eyes of guard dogs and laser beams. Dear potential bank robbers – sadly it is not. But it’s all I’ve got for now and I am realizing, regardless of it’s amount, I should still be making the most informed decision possible where it goes).
Stuart Robertson discusses how to rank your financial priorities at Forbes.com. Specifically, the article suggests where to place your retirement savings into your overall financial plan. Since my foray into finance began, I have been schooled in both investment and personal finance. I have gained a deep respect for those that have a clear understanding of their own financial paths and even more so for those that have been able to successfully teach me about it along the way. And here we go again. According to Mr. Robertson, in the grand scheme, the correct order of personal finance priorities is:
1. Build an emergency fund of at least one month when you first join the workforce. Here he discusses those unexpected expenses (like exploding pools and last minute trips to nyc, perhaps??). When the unexpected happens we are more likely to use our credit cards and as these are unsecured loans, they come with a much heftier interest rate. Having a contingency savings of 3-6 months is ideal.
2. If you’re in credit card debt, focus on paying it down (if you’re not, stay out of it) Here he prefaces this by suggesting to do this after you’ve put at least $500-$1000 in savings first, and suggests that if you have multiple credit card balances (is there any other way to have them, really?) to try “consolidating ot the one with lower interest rates or pay off the one with the smallest balance first. then take the amount and apply it to what you are already paying to the bigger balance card…it’s called the snowball effect where you gain momentum in eliminating debt by focusing on the smallest balance first and then taking down the next and then the next“. writes Robertson.
3. Start saving for retirement – the earlier the better. So essentially, the younger you can start the better. I am not disagreeing, but I would like to argue that younger is a relative term y’know? If I was a tortoise I would still be in my infancy, playing with dolls and eating pre-sliced goldfish practically. And I still giggle at the word Uranus and watch Glee – that’s totally immature right? So I tell myself I am ok for retirement savings. For now…
4. An affordable home and car come in four and five on his list. According to Robertson (and I heartily agree), “A home is so much more than an investment; it’s where you live and at the same time it shouldn’t own you“.
I would also like to add that a home is a place where you should feel safe. There is no way we could have prevented the light from exploding but having an emergency fund would give me more peace of mind knowing that when pools explode – or roofs leak, or refrigerators break – that we are covered financially, at the very least. As my buddy Gail Vaz-Oxlade likes to remind me, Where you are today is not where you are going to be tomorrow. I think I am finally beginning to understand what she may have meant by that.
When her youngest child caught her stealing from his piggybank, Marci
O’Connor realized she needed to gain control of her finances. She has
made it her goal to educating herself about personal finance and
investments, and share what she’s learned with her readers. Marci
chronicles her journey on beingmarci.com. To read more posts written by Marci visit Wall Street Survivor. Wall Street Survivor
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