Hello and welcome. Can you feel it?
That's the excitement of retirement and
it's right around the corner. You've
worked for decades. You've saved and
you've planned. But there's one critical
final sprint you need to make in this
last year to ensure a smooth and worryf-
free transition. And that's building a
robust emergency fund. Now, you might
think you've already done this, but a
retirement emergency fund is different.
It's not just a buffer. It's your
financial fortress, and it protects you
from a world where you no longer have a
regular paycheck to fall back on. So,
today, I'm going to break down exactly
why you need this fund and how to build
it in just 12 months.
So, why is your emergency fund such a
top priority now? Well, in the working
world, an emergency fund gives you a
cushion. In retirement, it's
non-negotiable. It's a safety net. Why
is this? Well,
first, there's a lack of a steady
regular income. Without that regular
paycheck, a single unexpected expense
like a major car repair or a sudden
dental bill can force you to tap into
long-term savings or even worse, your
carefully managed investment portfolio.
Secondly, an emergency fund protects
your investments from market volatility.
Now imagine the market takes a dip right
when you need to cover a new roof for
your home. Without liquid cash, you
might be forced to sell your stocks or
bonds at a loss,
permanently damaging your nest egg.
Your emergency fund acts as a vital
firewall, keeping your retirement
savings safe and untouched.
So, let's talk about the 12 month action
plan.
So, how do you get this done in just one
year? Now, here's a simple three-step
plan. One, set your target number.
Forget the old rules of thumb. Your
retirement emergency fund should cover
between six and 12 months of your
essential retirement expenses. That
means things like your housing, your
utilities, your groceries, and
healthcare.
And why essential expenses? Because
those are the costs you absolutely
cannot avoid. Calculate this number now
and make it your mission.
So step two is to start the saving
sprint. Now with your number in hand,
it's time to get aggressive for the next
12 months.
Automate your savings. Set up a monthly
transfer from your current account to
your emergency fund. This kind of makes
it automatic and non-negotiable.
Re-evaluate your spending. Look at your
budget with a critical eye. Can you cut
back on dining out, subscriptions, or
other non-essentials for the next year?
This is the final push.
What about one-time windfalls? Do you
have a work bonus, a tax refund, or any
other one-time payment coming in? then
redirect it straight into your emergency
fund.
Step three is then to find the right
home for your cash.
So your emergency fund needs to be in a
lowrisk liquid place. This is not for in
long-term investing. This is for easy
access. Now some of the options for you
may be a high yield savings account.
These offer a better interest rate than
a standard savings accounts helping you
to grow money with only slight amount of
risks. Then there's one of my favorites
which is the money market accounts and
these are another lowrisk option that
provide easy access to your funds and we
talk about market money accounts quite a
lot on this course. The key is that the
money is safe and instantly accessible.
You can't afford to wait for a brokerage
to settle a trade. So, where are we
trying to get to? Peace of mind.
So, let's think about what this
emergency fund truly brings you. It buys
you the freedom to enjoy your retirement
without the nagging fear of the
unexpected.
It means that when you do get a surprise
bill or there's a market downturn, your
first thought is not, oh, how am I going
to pay for this? But rather, thank
goodness that I had prepared for this.
Think of it as the final gift you can
give yourself as you step into the next
chapter of life. So, let's start your 12
month sprint today.
Now, don't forget to read through the
rest of the course and the infographics
in the section and also have a little go
at the quiz as well and revisit any
areas that you're not sure about when
you do go for the quiz. And I'll see you
down on the next section.