For a week, the local weather forecasters were hyping what was threatening to be the worst snowstorm in the Seattle area in at least a decade if not longer. Names like “Snowmageddon” and “Snowpocalypse” were bandied about as the front of the storm approached in seeming slow motion. The forecasters were right and the storm developed pretty much as they predicted. Schools closed, the streets covered with snow. At one point there were more than 200,000 people without power. The governor declared a state of “emergency”.
I think the use of the term “emergency” in this case is funny. Everyone knew (or should have known) it was coming. There was ample opportunity to get out and stock up on necessities before the storm arrived. Had the unprepared folks been ready, the emergency of this storm would have been at worst an inconvenience. It could even have been an adventure.
Real emergencies in our lives are those things we can’t see coming, but we know they will come when least expected. Things like the loss of job, extended illness or even car trouble can happen “out of the blue”. There isn’t the equivalent of Doppler Radar to tell us that kind of storm is on the way. What we do know is that in any 10-year period, the chances of suffering from a major negative event approach 80%. The time to start preparing for that event is now.
The how of preparing for that event is with an emergency fund. An emergency fund is a sum of money equal to between three and six months of expenses. It is not an investment, rather it is insurance. Your emergency fund is kept separate from all other funds in a place where it is easy enough to get to should the need arise. A good choice might be separate savings account and a better choice might be a money-market account with check-writing privileges.
What will you do when an emergency comes? Will you go into debt “to cover it”? Do you have an emergency fund? Are you prepared for your own personal “Snowmageddon”?
Tim and Kathryn Gerken are Personal Financial Coaches in Newcastle, WA. They serve their community in the greater Seattle area.
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