The Peace of Mind Account by Greg Hammond
Generation X & Y
If you were hit with an unexpected expense today how would you pay for it? Do you have money saved up and set aside for unexpected expenses or would you end up charging it to a credit card and then stress and worry about how to pay for it? This is where a Peace of Mind account comes in.
Do you have a Peace of Mind account? If not, you should. A Peace of Mind account or emergency savings account should be the cornerstone of your finances and is the first step in building a strong financial future.
A Peace of Mind account gets its name from the fact that it provides you just that, peace of mind. There aren’t many things in life that can be guaranteed, besides death, taxes, and the fact that unexpected financial events and needs will occur in your life. Whether it is an unforeseen car repair, unexpected health or dental bill, or a sudden job loss, various unforeseen expenses will happen. When they do happen wouldn’t it be nice to have the money set aside in a savings account just for unexpected expenses? This is what a Peace of Mind account is all about. No matter what unexpected expense may come your way, you can calmly address the problem because you have adequately saved money in a secure, liquid and accessible account.
So how much should you save? I suggest setting aside three to six months of living expenses. For example, if your expenses are $3,000 per month, consider saving $9,000 to $18,000 in your Peace of Mind account. This may sound like a lot of money, but you can do it if you look at ways to start saving some money each month. Even if you start with a small amount, the important thing is to start.
A smart wealth building strategy is to set funds aside in your Peace of Mind account before you pay your monthly expenses. If you wait until the end of the month to see what’s left over, you’ll find that you seldom have the funds to save. If possible, set up a systematic monthly transfer to automatically set funds aside. An automatic transfer allows you to make steady progress without thinking about it and you’ll be surprised at how quickly you can build your savings. It’s also important to save your Peace of Mind funds in a separate, secure, FDIC insured savings or money market account with a local bank or credit union. Don’t leave the funds in the account you pay your monthly living expenses from because it makes it too easy to dip into your Peace of Mind savings.
Peace of Mind funds shouldn’t be invested in a Certificate of Deposit or any other market investment. Even though a savings or money market account may not earn very much in interest, it’s important to maintain the funds in an account that is liquid and available without penalties or chance for investment loss.
With a Peace of Mind account you can focus on enjoying life without worrying about unexpected expenses that will come your way. Just think of the peace of mind you’ll have when the next unexpected expense comes along and rather than stressing about how it will impact your monthly budget or increase your outstanding credit card balance. Start on your path to financial independence today by creating your Peace of Mind account.
Greg Hammond, CFP®, CPA is a wealth impact strategist who works with individuals, families, closely‐held and family‐owned businesses, helping them grow and preserve wealth, plan, for retirement and manage their charitable giving. He may be reached at 1-800-416-1655 or firstname.lastname@example.org.