Now, we have to ask you to kindly take your mind out of the gutter. Yeah you! The cushion we speak of is an emergency financial cushion. If you thought not getting some of the other cushion was bad, then you don’t want to run across not having an emergency financial cushion.
Some say to save for a rainy day, while others profess that tomorrow is promised to no one. We at Urban Professor believe that while both are true, no one wants to see tomorrow and not be able to do it up as big as, or even bigger than they did it yesterday. Think about it, are you still making love CD’s for the love in your life or winding up a disposable camera to take pictures to capture the moment? We didn’t think so. By now, you’ve elevated your game to making an iPod playlist for that special someone or pulling out your camera phone and snapping a picture of your desired moment (or undesired, like that guy who keeps stalking you). Either way, our point is that you don’t want to go back to where you were before you got upgraded. Thus, the importance of an emergency financial cushion is to maintain your lifestyle and cover your expenses in the event that your income changes or stops abruptly.
The goal of an emergency cushion is to maintain your swag even when life challenges your usual means of doing so (i.e. a recession, losing your job, an injury, a pay cut, desire to quit, etc.). A good emergency cushion should be about 6-9 months of your living expenses. It only sounds challenging, think of it as “self-insurance,” like when Chris Rock so famously said, “insurance should be called ‘in case s@%# …in case s@%# happens.”
The blueprint is simple; you should first make a list of your monthly expenses (i.e. rent/mortgage, cell phone bill, food, car note, car insurance, student loan (we know Sallie Mae is crucial about getting hers), beauty, and even that late night cookie fetish); basically anything that you pay for monthly or quite periodically. After you make the list, total it up to find out your monthly living expenses, then multiply the total by at least 6 months. For example, if your monthly expenses total up to $1,000.00, multiply $1,000.00 x 6, and you’re looking to save at least $6K towards an emergency cushion. The good news is that though an emergency cushion should be a top priority, it is something that is attained gradually over a period of time, and requires little more than discipline and determination.
You should then take the total for 6 months of expenses and divide it by the length of time you would like to take to establish the emergency cushion (a good time span could be 18-24 months). Using the same example as earlier and assuming that you’re paid bi-weekly, you would divide $6K into 52 (two years of bi-weekly paychecks) and your goal will be to save approximately $115 per pay period into an interest-earning money market account; we suggest one like INGDirect.com.
There you have it, swag for today and swag for tomorrow, no disposal cameras needed. That’s a win-win situation. Now go get you some cushion.