EMERGENCY FUND

Saving money for unforeseen situations and emergencies is essential to achieve financial freedom

In my previous post, I commented that since my first job I accumulated a good amount of money, as I managed to save more than 90% of my income monthly.

My cookie jar was too small for the amount of money I had already saved. In fact, it's been a while since I used my cookie jar as a piggy bank. My bed mattress turned into my cookie jar. But I knew I couldn't leave my money under my mattress anymore, as it wasn't a safe place, especially when you live with siblings

MONEY SAVER

I remember that when I accumulated my first R$ 3,000.00 (almost 1,500.00 dollars), I knew that the bed mattress was no longer safe for me to keep the money.

So I went to my bank manager, who proposed putting the money in a savings account. And that's what I did. I opened a savings account and put the BRL 3,000.00.

I started putting all the money I saved into the savings account. I was a saver money because it seemed smart but I did not have an end goal in mind.

At the end of 2006 I managed to accumulate R$ 7,000.00 (almost 3,000.00 dollars), but all because of my economy and almost nothing because of my profitability. I was not at all satisfied with my profitability, which made me study financial education.

FINANCIAL EDUCATION

Compared to what we have today, in 2007 we had few blogs about investments in Brazil. Luckily at that time we had some books on financial education. I loved reading about the subject, I even considered changing my law course for economics at that time.

Despite the captivating titles, all the books I read had a common idea to get rich: Get out of debt, work, save and invest. Well, I was out of debt, making money and saving. So I went to the next step before investing, which was to make an emergency reserve.

It was even fun to read what they wrote about the emergency reserve, as they said it was a safety mattress. And that's exactly what I was doing: leaving my money under the mattress

BUILDING AN EMERGENCY FUND

According to financial educators, it is necessary to accumulate the equivalent of six months of expenses to have an emergency reserve. But I already had a lot more than that, so instead of six months I accumulated twelve months of my expenses, which I still do today.

But I no longer invest my emergency reserve on the same product. Instead of the savings account, I use Brazilian Treasury bonds.

I don't look for any profitability with the emergency fund. I see my money invested in the emergency fund as soldiers protecting a fort. In order not to have to liquidate my positions in shares, I have this barrier in case of emergency, but I never needed to use my emergency reserve, which shows me that I have a well-structured financial plan.

The construction of the emergency reserve was fundamental for me, as it gave me more security to be able to invest in other assets with more risks.

More risk, more return. Let's talk about it in the next post!