2140: [Part 2] An Emergency Fund Can Save You from Financial Disaster and Even Grow Your Business by Dustin Heiner on Business Finances

[00:00:00] Evening, buyer's remorse. Buy a new car? I'll be moving in. Let's get started. Uh, sorry, I think there's been a mistake. I bought it from Carvana. You what? Yeah, great price. I even have seven days to love it or return it. So there's no... No, no buyer's remorse. More like buyer's rejoice? I guess I'll let myself out. Congratulations. I mean it. Buyer's rejoice. Buy your car today on Carvana. Limitations and exclusions may apply. See our seven-day return policy at Carvana.com.

[00:00:30] This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales. Using automation, analytics and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify.

[00:01:00] This is Optimal Work Daily. An emergency fund can save you from financial disaster and even grow your business. Part 2 by Dustin Heiner of MasterPassiveIncome.com An emergency fund helps you to not live paycheck to paycheck. J-O-B actually stands for just overbroke. When you're living paycheck to paycheck, sale to sale, or month to month, you are letting life pass you by.

[00:01:28] Without cash on hand to buy the things you need, want, or desire, you are missing out on great things. By having an emergency fund, you get in the habit of saving money for future use, buying a new investment property, vacation to Hawaii, or even things like remodeling your kitchen. All of these are possible with money, and not advisable if you need to go into debt to pay for them. Where should you keep your emergency fund? Here are some prerequisites to where you should keep your emergency fund.

[00:01:58] 1. In a safe place. Not under your mattress where a home intruder can swipe it quickly. You want to keep it in a safe place that can keep thieves away from it. 2. Liquid. Not like water. Preferably still in cash. Again, I like CIT Bank for the great returns.

[00:02:25] It is not recommended to put the emergency fund in a commodity, stock, or real estate. These are all hard to convert to cash, which is how you will pay for those unexpected expenses. So don't buy gold with it or mutual funds, certificates of deposit, or something else that you need to convert into cash. Cash is king, so make sure you keep your emergency fund that way. 3. Accessible. Being able to quickly pull the money out of your safe or bank would be preferable.

[00:02:54] The goal is to be able to use the money when you need it, not two weeks after you need it. And 4. Earning interest. Inflation is, on average, 3%. If you just keep your money without earning interest, you are actually losing money. 3% per year, to be specific. That means your $20,000 in emergency funds will only buy $19,400 worth of goods the next year after you save it. Be sure that you are earning interest.

[00:03:21] Again, CIT Bank is giving the highest interest I've seen every month on your money. That is cash back in your pocket every month. With an example of $27,000 saved in an emergency fund, you will probably earn about $30 a month in interest. Wouldn't it be great to have another $30 more than you had last month for doing nothing? With a normal savings account at Chase, Bank of America, or Wells Fargo, it will take you the entire year to earn $10 in interest. How do you set up an emergency fund?

[00:03:51] There are many different thoughts about how to plan for an emergency fund. You can go by your expenses, your income, your future purchases, etc. The best way I've seen to plan for an emergency fund is to have 3-6 months of expenses saved. This would be any and all expenses you and your business will have during an average month. If your total expenses for you and your business is $4,500 a month, you will use that amount and multiply it by how many months you think you may be without any income if there is an emergency.

[00:04:21] To be on the safe side, I recommend having 6 months saved. You could have less, but you are probably not as prepared as you should be. For the $4,500 per month example, a 6-month emergency fund should have $27,000. I know, I know, you may say to me, $27,000 is a lot of money to save up. How will I ever get that much? Honestly, if you're asking that question, I suggest you put more effort into building your business to make more money. When you make more money, you tackle two potential problems.

[00:04:50] One, you are able to save more money faster to fund your emergency account. And two, you now have a stronger business, which leads to increased income. What else could you do with your emergency fund? Joseph Hogue of mystockmarketbasics.com shares what you could do instead of having cash on hand in an emergency fund. He recommends keeping your money in a diversified portfolio of stocks, mutual funds, real estate, and bonds.

[00:05:18] This would make your money work for you instead of having it just sit around. The key would be to keep it mostly liquid so you can get to it. You can sell stocks rather easily if you need to get to the cash for a rainy day. You just listened to part two of the post titled, An Emergency Fund Can Save You From Financial Disaster and Even Grow Your Business by Dustin Heiner of masterpassiveincome.com.

[00:05:47] Evening, buyer's remorse. Buy a new car? I'll be moving in. Let's get started. Uh, sorry, I think there's been a mistake. I bought it from Carvana. You what? Yeah, great price. I even have seven days to love it or return it. So there's no... No, no buyer's remorse. More like buyer's rejoice? Ugh, I guess I'll let myself out. Congratulations. I mean it. Buyer's rejoice. Buy your car today on Carvana. Limitations and exclusions may apply. See our seven-day return policy at Carvana.com.

[00:06:16] This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales. Using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify.

[00:06:46] And thanks again to Dustin and his team. A little bit more about Master Passive Income. The expert team at Master Passive Income is there to teach you everything you need to know to start investing in rental properties and how you can create your own passive income business from scratch. To find out more, visit masterpassiveincome.com. And thank you again to Dustin for letting us share his work. Okay, that's it for today. I thank you as always for listening and for being a subscriber or follower of the show. Have a great rest of your day

[00:07:16] and I'll see you back here tomorrow where your optimal life awaits.