A Quiet Fortune column: Is a $400 need an emergency for you?
If you had an emergency that demanded a $400 fix, could you take care of it without borrowing the money or selling something? If your answer is “No,” you have company. According to the Federal Reserve Board, 47 percent of us would view a $400 emergency as a crisis.
It’s time to reverse that. But how?
Obviously, the best chance for most people of having enough money does not come from getting an inheritance or winning the lottery. It comes from a simple change of mind. Sure, a great big inheritance would help, but we can’t depend on windfalls. But the mind change? That works.
Step One, as I said in my column two weeks ago, is to make a decision: Decide that you will be a person who can and will become financially stable and secure. Even though you may have towering bills, you can make a few small changes that will make the difference.
Step Two on your journey is: Avoid the mistake of “being ashamed to invest small amounts.”
This is No. 1 on a list called “The Ten Dumbest Mistakes People Make About Money,” from Nancy Dunnan, one of the nation’s most respected financial advisers, in her book How to Invest $50-$5,000. If what you’re reading here seems too basic, you can get on the road to investing quickly with her book. It’s in the Garfield County library collection.
I do believe in the basics, however. Most of us can start slowly without knowing a thousand things. So let’s get to Ms. Dunnan’s main point: If we are not embarrassed about having only a little bit of money we’ll feel OK asking questions, we’ll put that little bit to work, and eventually we’ll be looking at much larger balances.
So gather up some small amounts to invest. How?
First, find as much as you can. Look in your wallet. If you have $10, take out at least $1 and put it aside. If you have some change lying around, don’t let it sit unused in a bowl. Pull it out for future growth. While you’re at it, see if your bank account typically has something left at the end of the month, money you might otherwise spend on things you don’t actually need.
Almost every one of us has a little money here or a bit of change there. I call it “sock money.” Hunt around and stick it in an old sock during the next few weeks.
Then take a look at your paycheck and decide that you’ll save a little bit from it for your future. You won’t give that portion to the companies you are helping to make wealthy; instead you’ll keep it as your own and watch it grow. You might even begin to think of ways to earn a little more.
It’s all about a switch in our thinking. The switch goes something like this:
Old thought: “I’ll never have any extra money. My bills are too large. I need this. And that. The kids need this and that. I barely make it through the month.”
The switch: “I can put away a small portion of my paycheck. In fact, I’ll set money aside at the beginning of every month. I could save by finding a way to lower my weekly food bill by a few dollars. Maybe I’ll have a yard sale. I might be able to work extra hours for overtime. Then I’ll learn basic ways to invest. Soon I’ll be out of the bad old days when I had nothing to show for myself after a month of work.”
Relatively soon, what we save and invest will begin to grow. We’ll have enough in our stash to pay for those $400 emergencies. And we’ll have begun a lifelong habit of money growth.
Take action. Start today.
Terrie Drake is a grandmother, the author of the book “A Quiet Fortune,” and a retired teacher and librarian. She and her husband have lived in Glenwood Springs since 1974. She is not a financial adviser; consult a competent professional for your personal financial solutions. She can be reached at email@example.com.
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