Emergency Funds - Sometimes People just Don't Learn

I was talking with a young fellow (age 31) yesterday who was telling me that his financial situation was getting better and better. He's working 1 full time job, 1 part time job, and doing some odd jobs on the side.

HE JUST DECLARED BANKRUPTY AND HAS NO SAVINGS
This young fellow recently declared bankruptcy, got a demotion at his job, and had his wages garnished because of outstanding debts.

It's a strong guess that he doesn't have any savings and lives paycheck to paycheck.

This fellow owns a small home, has a car and loves to buy electronics and toys.

I started to congratulate him on his new found success when he started to tell me about his new goal. What he was going to do with the money he was earning. I expected to hear that he was going to clear up his remaining debts and put away some money in an emergency fund.

HE WANTS A 60" FLATSCREEN TV
He indicated that his goal for the end of the summer is to buy a new 60" TV. A nice flat screen TV that he can put on his wall. The price tag on this TV is only $4,000. I was shocked actually.

I write about this because it's the kind of behavior that gets people in trouble.

I'm all for having goals and buying things you want in life. But spending every last cent you've got, year in a year out, to buy things you don't need is going to keep you living paycheck to paycheck.

This fellow has no emergency fund set up, so if anything happens to his health or job he'll have nothing to fall back on AGAIN!

My policy is... I will preach about money all I can on this site, however, I don't do it with people I know. They know what I do for a living and can ask all the questions they want, FREE OF CHARGE...

HERE'S WHAT I RECOMMEND
I would recommend that this fellow take the $4,000 and put it into savings. PERIOD. This is not the most exciting advice in the world. Emergency Savings don't show movies, they don't play video games, and they don't give you the prestige of owning a 60" FLATSCREEN TV.

Emergency Savings are dead boring. You don't get to see them, they earn 2.75% interest, and they live at the bank. Emergency funds are not as exciting as the big ticket items.

Emergency savings are all about peace of mind, and financial prudence though. If something breaks down, you get it fixed. If you can't make a bill payment, you've got back up money to help you out. You won't get hassled by creditors ever.

This young fellow just declared bankruptcy. You would figure that he would have an attitude of "I don't want to do that again!".

The I NEED TO HAVE THIS TOY NOW is the logic that really gets people into trouble and keeps them in trouble.

I think that if people have an income and are concerned about their finances, they should definitely set up an emergency fund. It is a definite must to set up retirement savings, and the emergency is just the first step in this process.

I thought I would take the time to talk about this discussion that I had. It's a case of the wrong thinking about money and what not to do.

Again... I"m all about goal setting. It would be a better idea for this fellow to save up money first, and then buy his flat screen TV. Hopefully at some point he will learn.

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