One of the first steps in building a life of financial independence is having an emergency fund. I am not talking about 1 months of living expenses saved, I am talking about having 6-12 months of living expenses saved. THAT IS AN EMERGENCY FUND. I fear that many of my nurse practitioner colleagues do not have this, and that only enslaves you more to corporate healthcare. You cannot afford to find another job or start a practice when you are living paycheck to paycheck. It will be too stressful.
This is the main benefit of having a substantial emergency fund, it allows you to take more risks, such as starting a practice. You know that you can pay ALL your bills, feed your family, and live comfortably for 6-12 months if you lost ALL OF YOUR INCOME. What are the chances of your income streams drying up to zero? Very slim, especially if you have multiple income streams. This is why having an emergency fund creates such a SHIELD to your financial well being. You become almost invincible financially when you have those type of cash reserves.
Not only that, but it reduces the amount of anxiety in your life substantially. You no longer have to worry about where that next dollar is coming from to pay a certain bill if you lost your job. This type of fear never even crosses your mind when you have an emergency fund!
In our society of consumerism where people go into debt for furniture, jewelry, cars, and vacations, it is very hard to build an emergency fund. The Federal Reserve estimates that the median American savings is $5,200… $5,200, crazy! The Federal Reserve also estimates that 39% of Americans do not have enough to cover an unexpected $400 expense. It is truly pitiful. If you are serious about becoming an Elite Nurse Practitioner among your colleagues, then do not be one of these statistics. You need to build that emergency fund!
If you already have a 6-12 month emergency fund, then congratulations. If you don’t though, do not worry, you can build one up with the right plan. Lets go over a simple strategy on how to do this:
- First, it takes some planning. You need to dive into your finances and determine how much you spend on the essentials such as housing, utilities, car payments, and food. After you figure out that, then determine how much you spend on the luxuries of life like going out to eat, cable TV, vacations, etc. You will have 2 numbers after you do this: essential living expenses and essential + non-essential living expenses.
- Your goal should be to save enough to cover 6 months of essential living expenses. This will be the first milestone in your journey to building that emergency fund!
- After you hit the 6 months of essential living expenses, then continue to save to hit the 12 month amount. Now you have developed a financial barrier to uncertainty!
- If you can afford to do so, I would recommend saving to an amount that is in between the essential living expense number and the essential + non-essential living expense number. Who wants to live off beans and rice for 12 months and have no fun? I certainly would not. If you also save some money to enjoy life within your emergency fund, then you will truly be an UNSTOPPABLE financial force within your personal life.
Many people will have a hard time hitting the saving amount to satisfy 6-12 months of living expenses. One of the best ways to help you reach your emergency fund goal is to simply live below or within your means. If you have a $1,200 car payment, $3,500 mortgage payment, and various other high expenses, then your emergency fund will have to be HUGE to satisfy your financial requirements. Best of luck, I hope you make a lot of money… For the nurse practitioner who lives within their means though, that emergency fund amount will be substantially lower to that of the person living the high life.
You would be amazed how much you can save if you live more cheaply and really dedicate yourself to saving. Every nurse practitioner should have the ability to save $500 or more a month towards their emergency fund. If you can save more, then you should.
I was able to save for the entirety of my emergency fund within 14 months by cutting down on my personal expenses and increasing my savings rate. I have an emergency fund that will allow me to live comfortable for 12 months with ZERO income coming in. Like I mentioned earlier, the chances of this happening are very low because I practice the principles of The Elite Nurse Practitioner Model, most importantly, I have multiple income streams by maintaining a part-time job and having multiple side businesses.
I want my nurse practitioner colleagues to be an EXCEPTION among healthcare professionals, don’t be another statistic. Far too many medical providers (including doctors), nurses, techs, and administrators live paycheck to paycheck. They are one disaster away from financial ruin. You cannot truly live a free life with that kind of possibility looming in the distance. Bad things happen to good people. Therefore, do everything in your power to build that emergency fund up! You will not regret it!