When Derek Sanchez was fired, the company he worked for owed him money.
Derek doesn’t like to go into specifics. But he says the amount was somewhere in the region of $80,000-90,000.
Unfortunately, his former employers, who were notoriously cutthroat, had no intention of paying him what they owed.
When they kicked his butt to the curb, without warning, they tried to force him to accept 20% of the sum owed and sign a contract saying he would not pursue payment any further.
This is a common tactic used by soulless megacorps. They bank on a couple of weeks of unemployment taking the fight out of the employee and forcing them to give in. If Derek couldn’t find a job immediately, he’d have to accept their offer just to keep the wolves from the door.
But Derek was nobody’s fool. He had a plan.
A plan and a six-month emergency fund.
“I hired a lawyer and sued,” says Derek. “And in the meantime, my wife and I lived off our emergency fund. We did that for about two months until I was able to find a new job… it was a better paying job too!”
Derek estimates they only used about 20% of their emergency fund before he got hired again. And 10 months after he was fired, he won his case and received the full payment from his former employers.
“If we didn’t have that emergency fund, we wouldn’t have been able to hold out,” says Derek. “We wouldn’t have been able to hire the lawyer. We would have been screwed. We would have had to take the 20% and it would have been all gone by the time I got back to work.”
As a reader of Money & Crisis, you know the importance of a robust emergency fund. (In fact, it’s step two of our financial emergency plan. You can find step one here.)
- A full 78% of all U.S. workers are living paycheck to paycheck
- 55 million Americans have no emergency savings
- And nearly half have no retirement savings at all.
This means that more than half the country is woefully unprepared for a personal financial crisis, let alone a total economic collapse.
It also means that if you can hit two simple savings milestones, you will be financially more secure than almost 70% of the country.
If you’re sticking to the 50/30/20 budget plan, this first milestone is easily achievable. You need $1,000–1,200 cash, in twenties, kept in a secure location at your home.
This cash on hand can be a lifesaver. You can save a little more if you wish, but this should be enough to get you through most emergencies in which cash isn’t readily available — for example, if there’s a run on the banks or they are shut down entirely.
Keep the cash hidden in a covert safe, like an electrical panel with a hidden safe or a false vent safe.
Note: As with any on-site valuables or home security features, you should keep this information to yourself. I trust my neighbors but I play my cards close to my chest just the same. You’d be surprised how quickly information can travel in a community.
If you’ve ever lost a job, and had to switch gears from your full earning power to zero in a day, you know just how important this second tier of savings is.
The specific amount required will differ depending on your situation, but generally, I recommend saving the equivalent of six-to-eight months’ income.
Derek had six month’s pay saved away and that allowed him to take his time when looking for a new job and find a better paying position with a reputable company.
And that’s the beauty of a robust emergency fund. It’s versatility.
It can be a cushion when times are tough. It can buy you time to make the right decision. And it’s the perfect buffer for unseen emergency costs like healthcare or auto repairs.
As we head into the choppy waters of 2019, now is the time to make sure you have your fund well-stocked.
All the best,
Editor, Money & Crisis
P.S. Governments around the world are secretly preparing an alternative strategy for the next big crisis: a lockdown.
The global elite has already started making their own preparations, including hoarding cash and hard assets.
It will be the average investor who suffers most — unless you act now.
New York Times bestselling author Jim Rickards pulls back the curtain on this global collusion in his new book The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis.
And for a limited time, Jim is giving away free copies to readers of Money & Crisis.
In this groundbreaking tell-all, Jim reveals the powerful strategies you can use to protect your money and your family from the coming crisis.
In light of recent events, there isn’t a better time than now to take Jim up on his offer.