Creating a Safety Net

The realities of life must never be ignored. Storms will come. Tires will blow out. Anniversary gifts will need to be bought. Property taxes will have to be paid. The question is, how are you planning for these expenses? Building a financial safety net (aka. establishing a savings account), will allow you to pay for these future expenses without the anxiety of piling up credit card debt. 

Future expenses can be categorized into two basic categories: planned and unplanned. Planned expenses include everything you KNOW you will have to pay for in the future. These include anniversary, birthday, and Christmas gifts, upcoming vacations, annual personal property taxes, summer youth camps, and even shoes that wear out. A good indicator for knowing if you should save money for an upcoming expense is to ask yourself, “Will paying for this out of my regular paycheck be possible without breaking my bank account?” If you know that your regular check will not cover these known expenses, it would be wise to create a financial safety net that will help you pay for them. 

Unplanned expenses can include medical bills, vehicle breakdowns, home repairs, and even that spur-of-the-moment offering for the single mom in your church who was laid off work.  Wisdom instructs us to always be ready for emergencies. 

The Bible gives us many examples of the benefits of planning for our financial future. For example, Proverbs 21:5 tells us “The thoughts of the diligent tend only to plenteousness; but of every one that is hasty only to want.” A diligent, well-planned approach to your finances will allow you to have enough saved up for when you need it. God used this very principle in the story of Joseph in the book of Genesis when he interpreted Pharoah’s dream. 

Genesis 41:33-36 

33) Now therefore let Pharaoh look out a man discreet and wise, and set him over the land of Egypt. 

34) Let Pharaoh do this, and let him appoint officers over the land, and take up the fifth part of the land of Egypt in the seven plenteous years. 

35) And let them gather all the food of those good years that come, and lay up corn under the hand of Pharaoh, and let them keep food in the cities. 

36) And that food shall be for store to the land against the seven years of famine, which shall be in the land of Egypt; that the land perish not through the famine.

Joseph instructed Pharaoh to save 1/5^th, or 20%, of their income every year for seven years so they would have enough to make it through the coming seven-year famine. Saving 20% of your income may seem impossible, but it is wise to start somewhere. The following tips will give you a formula for determining how much you should save each pay period for future expenses. 

Planned Expense Savings Tip: Make a list of every planned expense you will have in the next 12 months. Divide that amount by your annual take-home income. Whatever that percentage is, set that as your “pay period savings goal” for Planned Expenses. Transfer that amount into a savings account every pay period and commit to not touch it until a planned expense is due. 

Unplanned Expense Savings Tip: Think back over the previous five years of your life. Make a list of every unplanned expense you encountered during that time period. Consider which expenses could likely be repeated in the next five years. Add that amount up and divide it by the amount of money you will likely make in the next five years. Like the example above, consider setting that percentage of your paycheck back each pay period. 

These ideas may seem impossible if you have never established a savings plan. But remember, it is much wiser to earn interest from savings than to pay interest on credit card debt.

Using Apps To Help You Save: 

Technology can be a tremendous help when establishing a savings plan. The following apps are highly rated in the financial management marketplace: 

• Mint – An app that is managed by Intuit, a popular financial, accounting, and tax preparation software
• YNAB – “You Need A Budget”- One of the highest rated personal financial management apps on the market
• Simplifi by Quicken – Supported by a 30-year history of financial software management 
• Personal Capital – Number one rated app by Forbes.com for tracking and managing expenses and savings
• Cash App – The number one rated app in the iTunes app store – Allows you to spend, send, save, and invest. 

For Parents: Greenlight is a very popular app for teaching children how to save money. It allows parents to set spending, saving, and even charitable giving (ie. tithing) limits for their children. Teaching children the purpose and blessing of saving money will benefit them their entire life. 

Financial challenges, like the rain, come to us all. A diligent approach to money management will help you build a financial safety net so you are properly prepare for the storm.