How to create a family stabilization budget for 9 months

What to do if your car is broken? Or if you got fired? If you are seriously ill and you can’t work? Where to find the money? How to exist? 

For the most part, in such situations people borrow money on their relatives, friends, banks (advertising of credits is everywhere and it’s not a problem to obtain them). But then you have to work two jobs seven days a week in order to return money back. 

What if I tell you that it’s possible to avoid all this? You just need to have a family stabilization fund. 

A family stabilization fund (also known as reserve fund, rainy-day fund, “safety cushion”, freedom fund, nest egg) is the accumulated amount of several monthly expenses aimed at the solution of force-majeure circumstances, such as loss of revenue or disease. 

How to create a family stabilization budget for 9 months

Your stabilization fund is the financial reserve. It’s freedom from circumstances beyond your control. You have probably already heard or even tried to create your stabilization fund. Let’s see which amount of money should be in a stabilization fund and how it should be preserved. 

If you have already created a Monthly budget, you understand which monthly expenses you have.  

Example for $ 8 000 monthly expenses. 

Different sources propose to accumulate money for a stabilization fund from 3 to 12 months. It’s certainly better to have more than less, but in the current context the optimal amount equals to 6 months. 

In our example the amount of a stabilization fund will be: 

8 000 х 6 = $ 48 000 

To make your stabilization fund yield even more benefits, I advise to diversify. 

Think about public bonds and precious metals.  

These instruments are the safest, so they help to better secure your money. 

In our example we can diversify the money as following: 

$ 48 000 / 3 (options) = $16 000

$ 16 000 deposit in the bank

$ 16 000 public bonds

$ 16 000 metal account in the bank

My stabilization fund helped me a lot when I moved and didn’t have a job. 

Working regularly in this field, I discovered some practical and useful life hacks of a stabilization fund. 

  • Make automatic all your savings! If you open a bank account, transfer a percentage or a fixed amount via an online banking system. Nowadays lots of banks propose an option of automatic transfer of funds. It’s indeed very practical. I can tell you that if you need to go to the other end of the city to replenish your account, you will give up an idea of a stabilization fund in a month. Automatization will save your stabilization fund and after a while you will be surprised to find out that your fund is replenished without your participation, at the same time your standard of living didn’t go down. 
  • Even if you don’t manage to put the money aside all time, even if you tweak out one day, you take everything and you spend it on one of your wishes, even if you have too little money in your fund… Just go ahead! Every time putting money aside, you create a HABIT, so that step-by-step your financial situation will change. You will have money for savings and investments. 
  • If you are dreaming of creating your stabilization fund, I advise you to start with the creation of your Personal Financial Plan, including your “Freedom Fund” as one of the savings goals. 

While working on your stabilization fund, some questions may arise. Here you can find my answers to the most popular questions. 

My money is in a stabilization fund that I can’t use. In meanwhile I am missing money to go on holidays, to make urgent and important purchases. 

Remember that your stabilization fund exists not in vain! This money is your “safety cushion” in truly critical situations. This money will save you in case of illness, dismissal or loss of ability to work!

What is better: to keep money at home or on your bank account? 

It’s wiser to keep your money in a bank, on a deposit account. In this case you will have several advantages: 

  1. Money will bring more money. Even if the interest of your deposit account is low, you will receive more money every month anyway. 
  2. The fact, that this money will be out of your home, is highly important. It means you won’t have a desire to waste it on momentary pleasure. While in a truly critical situation you will take the trouble to go to the bank and draw your money.  

Leave a comment

Your email address will not be published.