Rare is the Kenai Peninsula property owner who doesn’t remember at least one budget-busting maintenance emergency. It may have been a roof problem; perhaps a plumbing or electrical mishap…whatever the cause, unforeseen cratering of the household bank account can furrow brows and send blood pressures soaring.
For the very wealthy, it’s a non-issue. For all the rest of us, there is one foolproof method of avoiding the problem: create an emergency fund.
Everyone does his and her best to save for the future – for everything from the great events in life to more modest occasions, like family vacations. But making a clear distinction between those kinds of savings and a special emergency fund is worth the effort. For one thing, you remove the temptation to reach for a credit card – and create months or years of extra payments (plus sky-high interest). Nor will you be forced to dig into a major long-term savings account.
So, what is the secret that other local property owners use to somehow amass such an emergency fund? Where does anyone get the extra money to create it?
The answer is to engage in a form of financial jujitsu – a sort of monetary trick you decide to play…on yourself! The key is to start putting away cash each month. Subconsciously.
The most common method is to set it and forget it. Tell the bank to take four or five percent of your paycheck and place it in a savings account automatically. After the first couple of months of slightly painful adjusting, most people barely miss the subtracted money (which is also building interest). You might also choose an online-only bank to house the account. Although they may require a minimum balance to begin, online banks often offer higher interest rates than their brick-and-mortar counterparts. Additionally, when the fund is distinctly separated from day-to-day banking, it just sort of disappears: out of sight, out of mind — until you need it!
You can also trick yourself with other pain-reducing tactics. Some banks allow customers to round up all their charged purchases to the nearest dollar — then route the excess change into a savings account. Or when you finish paying off a car loan, credit card, or some other debt (like that hot tub you bought last year to improve the property), why not re-direct its monthly payment to the emergency fund? You’ve already budgeted for that expense!
Owning local property — and building equity in it — can be one of life’s greatest satisfactions. When you plan ahead to insulate the family budget from unexpected financial drains, it adds another positive. When it comes to real estate, I’m here to help my clients move toward their long-term financial goals. Creating one of these emergency funds is a step in that direction.