Bucket 1: Emergency Fund
Everyone has liabilities in their life, some more than others. You may have a house, a car, pets, children. Even if you’re straight out of college you’ll still have a rental contract. These liabilities can cause unexpected expenses.
You need an emergency fund to pay for surprise expenses, so that you aren’t forced to withdraw money from investments at a loss.
{Include picture of smashed emergency fund}
A good rule of thumb for an emergency fund is 3 months expenses. For Bob that’s $15,000.
This money should be easy to access. In today’s high-interest climate, that might look like investing it in a high-interest savings account like SoFi, Bob’s account pays 4.5%, that’s $56 a month, a meal out every two weeks.
Exercise: Have you got an emergency fund that holds 3-months of expenses? Great! Is it earning 4%+ interest? If not, get to it! If yes, great, let’s move on!