RULE 84: Put Something Aside For Emergencies/Rainy Days – The Contingency Fund

Lagos business woman, Princess Obanla Adebuhari  Elizabeth & Hubby

As well as
saving for your old age you’ll always need to have a contingency fund. I can’t
give you a definitive list of emergencies but here’s a few to get you thinking.
Don’t have nightmares now:
• Accidents
– motoring, industrial, work-related
• Illnesses

• Sudden
legal problems – like being sued or arrested wrongly
• Land
disputes – very expensive indeed
• Problems
with children – don’t start me off, there are too many to list here including
drugs, unwanted pregnancies, trouble with police, motoring, illnesses, travel
problems (it’s expensive to get them back from Thailand when they run out of
money and/or enthusiasm)
• Acts
of God – floods, earthquakes, tsunami, droughts, subsidence, forest fire,
pestilence (whatever that is)
• Sudden
unemployment
• Sudden
liquidation of your company

Recession. 

Problems with children –
don’t start me off, there are too many to list here including drugs, unwanted
pregnancies, trouble with police, motoring, illnesses, travel problems”

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So how much to put
aside and where do we put it? Well, the wise move is to put aside enough to
keep you going in the same style as you live now for three to six months
without having to even think about money for that period. Roughly half your
annual income if you like. Obviously if you get completely wiped out in a
tsunami or forest fire you’ll be insured so can collect, but you will need
something to tide you over. Medical bills can also be covered by insurance.
So where to keep
it? Most people keep it as a savings account – high interest of course, but
instant access. Personally I’ve noticed the shrewd rich ones keep a safety
deposit box with cash for emergencies as well; always handy in desperate times.
You only have to
look at humanitarian disasters to realize how quickly money runs out and how
conventional sources become desperately difficult to access. Surviving the
storms of Louisiana was bad enough for most people but it was a great leveler
because no one could access the banks because they too were under 10 feet of
water. And money quickly becomes a useless currency – food and water become the
priorities then (and guns I believe, but I don’t want to go there).
You might choose to take out sizeable insurance
policies to help alleviate the problems sudden emergencies can cause …
Alternatively you might prefer to squirrel away an emergency fund in a highly
liquid account (easy quick access), such as a saving account or money market
account (which pays higher interest rates). But, as usual, take detailed advice
from a proper financial expert – not me. 
From The Book; The Rules of Wealth by
Richard Templar
(Read Rule
85
of Rule of Wealth tomorrow on Asabeafrika)
Read-to-Wealth Series







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