How I Save For Emergencies — and Why I Still Worry About Having Enough
I’m a Millionaire: How I Save For Emergencies — and Why I Still Worry About Having Enough
August 2, 2024 by Cindy Lamothe GoBankingRates
One of the smartest pieces of financial advice out there is to have an emergency fund in case the unexpected happens. And while all of that is well and good, how much is enough?
GOBankingRates spoke with millionaires Tommy Mello, founder of A1 Garage Door Service, and David L. Blain, CFA, CEO of BlueSky Wealth Advisors, to discuss exactly how they save for emergencies and when they feel it’s sufficient.
“Since I founded A1 Garage Door Service in 2007, the company has grown to be a leader in the home-service industry,” Mello said. Through this journey, he’s faced numerous financial challenges and learned valuable lessons about saving for emergencies.
“No one likes to think about worst-case scenarios, but being prepared financially for emergencies gives you peace of mind,” Blain noted. “Then you can focus on living your life without constant worry over what might go wrong.”
Here is how these two millionaires save for emergencies and why they still worry about having enough, along with tips for creating an emergency fund.
How I Save For Emergencies
“Building an emergency fund has always been a priority for me,” Mello said.
He sets aside a percentage of his business profits into a separate savings account dedicated solely to emergencies. “This fund acts as a financial cushion, providing security and peace of mind. I aim to have at least six to 12 months’ worth of operating expenses saved,” he explained.
This approach ensures that his business can weather any unexpected downturns or crises without compromising operations.
Concerns About Not Having Enough Savings
“Despite having a substantial emergency fund, I sometimes worry about whether it’s enough,” Mello said.
He explained that the home service industry can be unpredictable, and unforeseen expenses can arise at any time. “For example, economic downturns, natural disasters or sudden equipment failures can significantly impact our financial stability,” he said.
These concerns drive him to continually evaluate and adjust his savings strategy to ensure he is well prepared for any eventuality.
Blain shared a similar view. “As a millionaire, I do worry about emergencies depleting my savings, even with a sizable emergency fund,” he said. “We keep enough cash on hand to cover six to 12 months of expenses, but medical issues or natural disasters could wipe that out quickly.”
Tips for Building a Solid Emergency Fund
According to Mello, when building an emergency fund, you should start small and be consistent. He advised beginning by setting aside a small percentage of your income each month. “Consistency is key. Over time, these small contributions will accumulate into a significant emergency fund,” he explained.
He also emphasized that building a solid emergency fund is crucial for long-term financial stability, especially in the unpredictable world of entrepreneurship. “By adopting disciplined savings habits and continuously evaluating your financial preparedness, you can ensure that you’re ready to face any challenges that come your way,” he said.
Blain agreed. “Building wealth is a marathon, not a sprint,” he said. Making regular contributions to your emergency fund and saving diligently over time is the key, according to Blain. “Stay disciplined, cut excess spending, and your emergency fund and net worth will grow over the years through the power of compounding,” he said.
Here are some additional tips for how to build a solid emergency fund.