How much money should be in your emergency fund?

A well stocked emergency fund will go a long way in reducing your stress in life. Next time you need new tires? No problem, you saved for that. Next time your appendix burst and they don't remove it all during the first surgery so you have to go back into the OR for a second surgery (just me???) problem! That's what savings is for! Some people call an emergency fund "peace of mind savings" but no matter what you call it; it's really nice to have. Now, plenty of people will argue about how much you should have in there but the common advice is 3-6 months of expenses, minimum. More or less based on your risk tolerance.

For most US household this number will fall between $8,000 - $20,000. As always, I encourage you to look at your finances and figure out what it would be based on your spending habits. No matter how you calculate it you'll realize that's a hefty amount of money you'll want to save! I recommend starting with what you can, find a way to save $5 a day - should be easy right. You could skip the coffee, pack your lunch, cook at home, make your own lotion, etc. These will all easily start saving money, FAST. After a year you'd be able to add $1,825 to your emergency fund and I bet you'd start enjoying watching that number grow and find even more areas of your budget to cut. 

The point is, hearing that you need a 5 digit emergency fund can sound really overwhelming and intimidating when you're just starting out on your financial journey. However, if you start small and stay committed you will see that number grow faster than you ever imagined. You'll start making small decisions to save hundreds of dollars and before you know it you'll have $10k+ in the bank and be ready to start investing. Believe me, that's when the real fun begins!

5 Tips to Get Out of Debt Quickly

Hey Pod-People!

While I love doing my weekly podcast I started realizing that I also wanted to be able to share quick tips or lists for you to reference without having to listen to entire episodes. Don't worry, the podcast is not going anywhere! I just wanted to create some additional content to help spark that fire to financial freedom 'cuz it feels really, really good to not have to worry about money and I know someday you can get to this point too!

So, if you clicked this you likely have some debt. Good debt (like a mortgage) or bad debt (like credit cards)? What's the interest rate? Some people say if it's less than 6% or so you should continue to pay the minimum and invest in a mutual fund. I typically say: PAY IT OFF! (with the exception of mortgages under 5% in which I could go either way). Okay so continuing, you have debt and you want it gone ASAP well you've come to the right place. Here's my 5 top tips:


1.) Do not add to it! - This may sound super obvious but I've worked with people who piled on the credit card debt or student loan debt and while they're paying it off they all of a sudden buy new furniture.....on credit. If you don't have the cash for something you no longer get the luxury of buying it. Anything you buy that is not a basic necessity (food, water, and shelter) needs to be paid for in cash from now on. 

2.) Prioritize it! - You may think "Duh, obviously why I clicked on this post in the first place it IS a priority" HOWEVER this needs to go through your head with every single purchase you make from now until this debt is paid off. You want those $50 shoes? How much longer will you have the debt because of it? You want to go out to eat once a week for $15 a pop? That's $780 less you have this year going to debt reduction. Come on, this debt is a priority so treat it like one. 

3.) Learn new ways to have fun! - Money <> Happiness (aka. money does not equal happiness for those that don't appreciate math logic symbols). If you're in a pile of debt in the first place you've obviously been living outside of your means and must believe that money is the key to buying things to make you happy. Or you have really bad luck but most of the time it's the first one. I want you to stop spending money on all extras right now. No more coffee (had to mention the cliche), no more going out to eat, no more bar money etc. It's going to be tough at first but once you realize you can have fun without all these things you'll realize what true happiness is all about. 

4.) Reduce Basic Necessities! - Food, Water, Shelter - that's all you get to spend money on while you're in extreme debt payoff mode. Even those need to be reduced as much as possible. My bare-bones food budget is $150 a month per person - some people can go even lower but I like to eat healthy besides eating only Ramen noodles will only lead to way more $$$$ later so this is the only area I'll cut you some slack. No restaurants either, time to become BFFs with your kitchen. Water should be free: no fancy pants mineral water that rejuvenates your soul with each sip (marketing anyone). Oh and shelter - if your debt is really bad you may need to consider a roommate or 2; if you're older you may need to downsize. Living in a McMansion, driving an SUV, sipping on lattes everyday only makes you feel rich but we know the truth so NEWS FLASH it's time to de-super size your life. 

5.) Be Patient! - If you read everything above while vigorously nodding your head in agreement and still feel like your debt is never going to be paid off, GIVE IT TIME! I know that's not what you want to hear but it took time to get in this mess and it's going to take some time to get out of it. Stay the course and it'll be paid off before you know it and then you'll be an investing/saving machine, RIGHT?

Housing Spreadsheet

Hey Pod-People -

As mentioned in Episode 3 I've created a spreadsheet to help you figure out how much house you can afford! By changing the inputs in blue and adjusting the down payment, insurance cost, taxes, interest rate etc. - cell B7 will show you what purchase price you can afford while staying in your budget. Remember, I recommend only 25%-30% of your take-home pay should be spent on housing! I also show what the 15-yr and 30-yr payments would look like - keep in mind that 15-yr mortgages usually have a lower interest rate!

Lastly - the 'post-sale' profit section shows how much you stand to make if you sell your house in a certain time-frame. Keep in mind that real estate can rise or fall in a given area so this is for informational purposes only. Helpful to illustrate that if you are not planning on being in a house for at least 5-years it may not be worth it to buy. 

Some helpful tricks I've learned as I've bought real estate over the years:

-Don't let emotions guide your decisions

-Make sure you stick to your budget - being house poor is not fun!

-Cosmetic details DO NOT MATTER! - You can easily repaint, refloor, put in new vanities etc. Don't get caught up on the small details. 

-LOCATION LOCATION LOCATION - being close to the area you work and spend most of your time keeps your transportation costs nice and low!

-A little extra payment goes a LONG way!


That's all for now, hope you enjoyed this weeks episode!