Are you one of many who may be taking your pay cheque for granted? The reality is we never know when that pay cheque may be the last for an unknown length of time. Most of us have recently heard of someone who no longer has a job because of the current drop in oil prices. Companies made tough decisions to let go of long-term employees. Both executive and labour positions vanished from the companies’ landscapes. No crystal ball can foretell when conditions might improve making job losses unavoidable, some temporary, others permanent. These new realities can be frightening times for people who are now relying on a reduced “income” funded through employment insurance programs to cover day-to-day expenses and debt payments. If savings are limited, then withdrawals from registered investments may be necessary. Only a few may have a severance payment to rely on until they find other work.
Believing that you will always have a job which provides a consistent income to support your needs and wants can be a false belief. When you believe that nothing will happen to cause you to be unemployed, you may be deceiving yourself. The truth is you can always find another job. The unknown factors are how long it will be before you find a job and what kind of income you will earn.
Think for a moment beyond job loss. If I have heard about others’ unfortunate life events, I know you have too: the ugliness of a divorce, an unexpected illness, or the devastating death of a loved one. All these unexpected unwanted circumstances impact finances.
The reality is anyone can face a dire situation. Think about this.
You know a major life event can send your emotions reeling. The last thing you want to concentrate on is finances. Your attention is on coping with the actual event, surviving, and helping others through life’s drama.
Imagine what it would be like if your cheque was suddenly reduced by 50% today. The panic surges. The financial pressure weighs heavily on your mind. Your world spins out-of-control.
I don’t believe in projecting fear to scare you into action but if you consider saving a small portion from each pay cheque then I’ve got your attention. If you realize you should focus on the important rather than the unimportant “stuff” then you will be prepared financially for life’s consequences.
So should you be saving – setting ‘some’ money aside for emergencies? The answer is, “Absolutely!” If you believe that “the only thing that relieves pressure is preparation,” you will save. This key message came from Tom Kite, an official PGA Tour champion, who knew the importance of preparation for relieving pressure when competing in golf tournaments. People who prepare relieve pressure whether they are delivering a dynamic presentation, writing a major exam, or rehearsing for an important job interview. The success lies in the preparation. Saving for emergencies is no different.
Don’t take your income for granted and believe that your income will always be at the same level. Don’t waste the money you exchanged for your labour. Believe it or not, your money is not yours to keep. Be a good steward because others are depending on you. Your family needs your financial support; the utility companies expect to be paid for the services you use; and your bank or credit union relies on you to pay back the money you borrowed.
Saving even “a little” money at a time will eventually become “a lot” of money over time. Seize the opportunity to tuck away money from each pay cheque with automatic transfers to an “emergency savings” as discussed in the previous blog, Are You Prepared for Any Emergency? When you incorporate this activity into your financial plan, you will create security while providing a sense of peace knowing you are prepared for life’s unexpected events.