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Debunking the Myth of Emergency Funds · Cash Confident with Brie Sodano

• 0:01
  Speaker 1: Welcome to the Cash Confident podcast.
• 0:03
  Speaker 1: I'm Brie Sedano, your fearless host, personal finance expert and the visionary behind the revolutionary Cash Confident community.
• 0:10
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• 0:22
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• 0:32
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• 0:43
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• 0:55
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• 1:02
  Speaker 1: So buckle up, my fierce and ambitious friends, as we embark on this transformative journey to becoming Cash Confident together.
• 1:10
  Speaker 1: Oh, hello, hello.
• 1:18
  Speaker 1: Brie Sedano here on the Cash Confident podcast, and I am thrilled today to be talking about all things funds, emergency funds, sinking capital or sinking funds and working capital and I'm going to just tell you that I have an unpopular opinion, which I think emergency funds are the worst, the absolute worst.
• 1:44
  Speaker 1: So I'm going to explain to you why somebody who teaches money would say such a crazy, crazy thing.
• 1:52
  Speaker 1: I'm going to teach you about the difference between sinking funds and working capital, and I'm going to give you some actionable steps today to move forward building savings, building yourself a cushion, preventing emergencies in a way that is more effective, longer lasting and just altogether more delicious than an emergency fund.
• 2:16
  Speaker 1: All right.
• 2:16
  Speaker 1: So somewhere in the world there is a story that goes something like you should save $1,000 in an emergency fund and then direct all of your free cash flow towards your debt.
• 2:30
  Speaker 1: All right.
• 2:30
  Speaker 1: Now this, in my opinion, and what I've seen working for people in their finances, is a terrible idea.
• 2:37
  Speaker 1: First of all, the unspecified number.
• 2:41
  Speaker 1: Right, well, it's a specified number, but it's unspecified towards anything.
• 2:45
  Speaker 1: So a random thousand dollars also, where I believe that information came from that that book was written maybe in the 90s.
• 2:56
  Speaker 1: So if you adjust for inflation first of all, the thousand dollars is really probably triple.
• 3:05
  Speaker 1: That just based on the inflation over the last.
• 3:06
  Speaker 1: Is that 30 years or whatever?
• 3:07
  Speaker 1: So, first of all, emergency funds.
• 3:12
  Speaker 1: The way that people generally use emergency funds go something like this as they set a number, that is, a specific number to save towards, to achieve but unspecified expenses, right.
• 3:23
  Speaker 1: So we're not looking to be like, all right, I'm going to use this for car repairs or I'm going to use this for whatever else.
• 3:32
  Speaker 1: And the reason why that that specific number but unspecified expenses is it takes all of the power of projection and kind of looking at what's coming down the pike and looking what's possible, completely out of the equation.
• 3:46
  Speaker 1: All right, so we're just saving a random number and we have really no idea whether or not that amount of financial cushion is going to save the day.
• 3:56
  Speaker 1: Or is it going to save the day, or is I mean it will help, it always has.
• 4:03
  Speaker 1: It always helps to have money right, all right.
• 4:07
  Speaker 1: So that's generally the way that it goes.
• 4:09
  Speaker 1: And so the other thing that I see when people are saving emergency fund, a lot of times they really do direct the rest of their cash flow.
• 4:15
  Speaker 1: So they get to a certain number and then they even direct the money that they were putting toward their emergency fund toward their debt.
• 4:22
  Speaker 1: Or, you know, most of the time it's towards debt.
• 4:24
  Speaker 1: You know, which is paying off your debt is a great idea, but what this does is it adds a start and stop to that habit.
• 4:32
  Speaker 1: So instead of habitually saving money, building trust with yourself, learning that you can spend money out of this when something comes up and then it will just be replenished every time you have to redirect money, start and stop.
• 4:44
  Speaker 1: It adds a lot of stress to your life.
• 4:46
  Speaker 1: The other thing I don't like about emergency funds is that we call them emergency funds.
• 4:51
  Speaker 1: Now I will tell you, in all of my years of doing finances, people do have emergencies.
• 4:58
  Speaker 1: People do have things that are completely and totally unexpected.
• 5:02
  Speaker 1: Right One time I had a client whose dad died and she had the pay for the funeral or a portion of the funeral, and that was a total surprise to her.
• 5:11
  Speaker 1: She was, that was a surprise.
• 5:14
  Speaker 1: There was nothing that she could have done to know that that was coming down down the pike.
• 5:18
  Speaker 1: You know what I mean and I've seen other situations where somebody's really got some last minute.
• 5:25
  Speaker 1: Sometimes emergency travel, sometimes you know an emergency.
• 5:29
  Speaker 1: You know sometimes something breaks.
• 5:31
  Speaker 1: You can't really see it coming.
• 5:32
  Speaker 1: But I will tell you, the vast, vast majority of what people talk about as a financial emergency is something that like we could have expected, that we could have seen that coming, and the reason that it was an emergency is because they didn't have the money.
• 5:50
  Speaker 1: So, listen, if you have the money, nothing is an emergency.
• 5:55
  Speaker 1: It is an inconvenience.
• 5:56
  Speaker 1: It could be a pain in the rumpus, it could, you know, be a problem, right Like, like, let's just say, today my car got towed for whatever reason, and I had to go pay a few hundred dollars to get it out of there.
• 6:08
  Speaker 1: I have a few hundred dollars.
• 6:09
  Speaker 1: It's not an emergency.
• 6:10
  Speaker 1: I might be annoyed about it, I might have some feelings about it, but it's not going to create an emergency.
• 6:14
  Speaker 1: But I would tell you that there was a time in college where I parked like a, like a big jerk face, and my car did get towed and I didn't have the money.
• 6:21
  Speaker 1: And it was an emergency because I needed my car and every day that I needed to solve the problem, they were charging me like another $250, you know, as a college kid, I was waiting tables and so it did create an emergency.
• 6:35
  Speaker 1: And where I'm going with this is the way that we talk about our money.
• 6:40
  Speaker 1: The way that we perceive our money, the way that we interact with our money plays a really big role in how we feel and what's going on, and so things like saying emergency or making things emergencies, to have to spend your money adds so much stress and anxiety and just yuck yuck to your life.
• 7:00
  Speaker 1: Right?
• 7:01
  Speaker 1: And when people have an emergency fund, then they have to start justifying things as emergencies to be able to use that money because they set it aside for that, and then we're just add again, we're just adding layers of stress, anxiety and a layer of like almost tragedy to spending our money on things.
• 7:19
  Speaker 1: So those are really the reasons why I don't even like the word emergency fund.
• 7:25
  Speaker 1: What I do like is having a savings habit.
• 7:27
  Speaker 1: What I do like is having money on hand and what I do like is using projection and even to save beyond projection.
• 7:34
  Speaker 1: Let's say, let's say, your projected expenses for the year you know are $10,000 and you're like all right, I want to have 15 in there just in case, you know, just in case I need to do something extra.
• 7:46
  Speaker 1: Right, it's not going to throw me off.
• 7:48
  Speaker 1: Okay, those are.
• 7:49
  Speaker 1: Those are things that I that I'm here for and that make a ton of sense.
• 7:53
  Speaker 1: What I'm not into is blindly saving a sum of money, starting a habit, stopping a habit, and then adding the word emergency and all of the justification that comes with an emergency into your expenses, mostly just because it creates just a less delicious experience with your money.
• 8:13
  Speaker 1: Right, like you get to pay for your oil changes and your car repairs, like you get to be prepared for that, you get to enjoy that, you get to be like delighted by the fact that this maintenance is, you know, is something that you get to buy, you get to pay for, you get to be grateful for.
• 8:31
  Speaker 1: Like needing an oil change, you know that you hadn't expected because you didn't project.
• 8:36
  Speaker 1: You know, making that into an emergency it's just again, it just adds stress to your life.
• 8:43
  Speaker 1: All right, so that's what I do not like about emergency funds.
• 8:50
  Speaker 1: Now give me a minute, because I'm a little ranty today.
• 8:53
  Speaker 1: I'm a little fully caffeinated, it's early for me.
• 8:55
  Speaker 1: I'm going to talk about sinking funds to and then I'm going to tell you some things that you can do around this, but I'm going to go through the ranty side first, right?
• 9:05
  Speaker 1: So sinking funds are funds where people will generally look at the project.
• 9:10
  Speaker 1: They'll look and say, all right, well, I'm going to need a new car and it's I'm going to want a $4,000 down payment and I have.
• 9:17
  Speaker 1: You know I want to be having that much money saved in 10 months.
• 9:22
  Speaker 1: So I'll put $400 a month aside into my new car down payment sinking fund.
• 9:27
  Speaker 1: And I know that, let's say, every 10 years my dishwasher needs to be replaced and it's $1,000, so I'll put $100 a year away into a sinking fund for the dishwasher.
• 9:38
  Speaker 1: Now that idea in general is a great idea.
• 9:42
  Speaker 1: It really is looking, projecting out, saying all right, I see the lifespan on some of these things, I'm going to be prepared.
• 9:48
  Speaker 1: I'm going to look at it in terms of a timeframe divide up that money, put that money aside.
• 9:53
  Speaker 1: That is all really, really great and it's a.
• 9:56
  Speaker 1: It's a.
• 9:57
  Speaker 1: It's a great idea.
• 9:58
  Speaker 1: Where this becomes a problem is that in real life, let's just say you have 15 sinking funds, right.
• 10:06
  Speaker 1: And let's say you think you have 10 months to buy a car, but five months in you're already saving the money.
• 10:14
  Speaker 1: You know you have a half of the money saved for down payment and you need the new car.
• 10:19
  Speaker 1: Now your old car just craps out Argentina, england, 125 sorry, f temperament, over 100,000,.
• 10:24
  Speaker 1: You're going to have the money because you have all these other sinking funds and then what's going to happen is you're going to take the money from the the sinking funds, or you're going to not take the money from the sinking funds.
• 10:34
  Speaker 1: You're going to not use the money that you have and maybe borrow more for the car, which could be fine.
• 10:38
  Speaker 1: You could do that.
• 10:39
  Speaker 1: That could be a great financial choice.
• 10:41
  Speaker 1: Or you may liquidate the other sinking funds and use that for the car, and again, that may be a great choice for you.
• 10:49
  Speaker 1: That may be the thing to do, but what it does is, when we're having all of these, these things funded, the chance that life is going to go along with your plan to that level is probably not going to happen, and so what this does is it makes us rework our plans over and over and over again, and every time we do that, we encounter discouragement and disappointment, because we were like, oh, I had this plan, I was going to save this for 10 months, you know, and I was going to go to the place and I was going to put this down, payment down, or I was going to buy this thing cash, or whatever the situation is, and then life doesn't go like that and even though you have the money, you're disappointed with yourself and one of the most important things about our relationship with money is the trust that we have with ourselves, the trust that we have in our habits, the trust that we have with our money.
• 11:38
  Speaker 1: And so situations where things don't go to go according to plan, situations where you feel a lot of disappointment, discouragement, those sort of things, it really erodes a lot of the trust that you've built with yourself.
• 11:53
  Speaker 1: It really does, and those negative feelings really show up because now the next.
• 11:59
  Speaker 1: So let's just say, let's just say, for the example is you know you're saving for the car, you need it early, you have the money to be able to put the down payment, but you have to liquidate let's just say, all of your, all of your sinking funds to be able to do it Now, instead of being like holy crap self, I had the money to put the down payment on.
• 12:16
  Speaker 1: I was five months ahead of schedule.
• 12:19
  Speaker 1: Yay for me.
• 12:20
  Speaker 1: And I have these wonderful savings habits, so I know that that account is going to be replenished.
• 12:24
  Speaker 1: You know, this is all working out great.
• 12:28
  Speaker 1: We're going to be like, oh, I had to liquidate half of my savings funds.
• 12:31
  Speaker 1: I'm doing this wrong.
• 12:32
  Speaker 1: Something's not right.
• 12:33
  Speaker 1: I'm really disappointed with myself.
• 12:35
  Speaker 1: I'm, you know, I just can't get this money thing right.
• 12:37
  Speaker 1: I'm just not that good at this and I've talked to thousands of people and so this that you know that may that language may be a little extreme or maybe whatever.
• 12:47
  Speaker 1: It's a podcast I'm demonstrating for you all, but where I'm going with this is having it all separate like that.
• 12:55
  Speaker 1: It just usually doesn't work according to plan, and so it puts people in a perpetual state of working and reworking their budget, which costs them energy and time and also creates a lot of just negative feelings.
• 13:07
  Speaker 1: So I have a course.
• 13:07
  Speaker 1: It's called the invisible system, and in the invisible system, one of the things that I teach is about a working capital account.
• 13:15
  Speaker 1: Now I'm going to tell you the things how working capital account goes, what goes into it, what, what to look for, how to project, and you can start using this account even if you're not using.
• 13:26
  Speaker 1: You know all of the invisible system right, or you could, you could, uh, or you could get the course.
• 13:32
  Speaker 1: I mean, we do it inside the cash confident community, we do it live, and sometimes we have it offered, and then you can get all of the juicy details you could go through and you could set up yourself a system where you can really effectively manage your household finances with no budget and like 20 minutes a month should be sufficient.
• 13:53
  Speaker 1: So here's what here's about working capital accounts All right.
• 13:55
  Speaker 1: So working capital accounts is our, their savings account, and you want to be able to easily transfer this money to the checking account.
• 14:04
  Speaker 1: So you, you want to, you know, have it in a bank account where you can log in.
• 14:08
  Speaker 1: You could see everything all along.
• 14:09
  Speaker 1: The purpose of working capital is to have money saved so you don't have financial emergencies.
• 14:17
  Speaker 1: It's the anti-emergency fund, it's the I got the money for this.
• 14:21
  Speaker 1: So there's no emergency fund.
• 14:25
  Speaker 1: It turns emergencies into mild inconveniences fund.
• 14:27
  Speaker 1: All right.
• 14:27
  Speaker 1: So here's what you want to be thinking about when you're.
• 14:31
  Speaker 1: When you're thinking about.
• 14:32
  Speaker 1: Here's what you.
• 14:32
  Speaker 1: Here's what you want to be thinking about when you're deciding how much money you need to save.
• 14:39
  Speaker 1: Now, listen, I'm going to tell you the things and I'm going to give you instructions.
• 14:42
  Speaker 1: Grab a piece of paper, grab a pen.
• 14:43
  Speaker 1: So, if you're listening and you're at home, grab a piece of paper, grab a pen.
• 14:45
  Speaker 1: We're going to get into some numbers in a second.
• 14:49
  Speaker 1: This very rarely, very rarely, works out perfect in anybody's finances.
• 14:57
  Speaker 1: This is a thing that you will work up to All right.
• 15:01
  Speaker 1: So I just want to say that.
• 15:02
  Speaker 1: So if you calculate your numbers and you're like holy crap, I could never put this much money every month aside for emergencies, that's okay.
• 15:13
  Speaker 1: There's nothing wrong with you.
• 15:14
  Speaker 1: You're not doing anything wrong.
• 15:15
  Speaker 1: Just start where you are and increase it as time goes, and if you have debt and you pay that off, you can redirect that toward your working capital and you can always use credit to fund a shortfall momentarily if need be.
• 15:31
  Speaker 1: But also this will give you a very good indication of how much it actually costs to run your life.
• 15:37
  Speaker 1: So the main main benefit of working capital is that it keeps you out of credit credit because you have the money to pay for expenses.
• 15:44
  Speaker 1: So what we're going to do with our working capital is we're going to be thinking about expenses that we definitely see coming in the next 12 months.
• 15:53
  Speaker 1: We definitely see these expenses coming.
• 15:55
  Speaker 1: Now, this is not a vacation fund.
• 15:57
  Speaker 1: This is not an upgrade fund and the invisible system.
• 16:00
  Speaker 1: We have a separate account for that.
• 16:01
  Speaker 1: This is just.
• 16:03
  Speaker 1: These are bills that we see coming that are not monthly bills.
• 16:08
  Speaker 1: So when you grab your piece of paper, you can start with irregular expenses, and so that may be things for you like.
• 16:16
  Speaker 1: I'll give you some of mine.
• 16:16
  Speaker 1: So I pay my car taxes twice a year January and July, I believe, or January and June, and I know that it's coming.
• 16:26
  Speaker 1: But if I'm unprepared it's not something I would put into my monthly budget because I don't pay it every month, I just pay it twice a year.
• 16:33
  Speaker 1: Like I have, a Terminix comes quarterly to my house.
• 16:37
  Speaker 1: I have an insurance that I pay semi-annually.
• 16:40
  Speaker 1: Some people may have lawn care, you know expenses, or snow removal expenses.
• 16:47
  Speaker 1: In my house One of my irregular expenses is heating oil for the winter.
• 16:53
  Speaker 1: There's a few months where you know I might be putting $800 into my oil tank but I'm not exactly sure which day it's going to happen and it's only throughout the winter.
• 17:05
  Speaker 1: I don't need that much oil in the summer.
• 17:07
  Speaker 1: I don't need oil at all in the summer.
• 17:09
  Speaker 1: You know, in my house we have oil and we have wood.
• 17:13
  Speaker 1: So I buy wood one time, usually August or September, and it's a considerable expense.
• 17:19
  Speaker 1: You know, $700,000, depending on what we have and what we need.
• 17:25
  Speaker 1: So you want to think through what are all of the irregular expenses that you definitely have and you just want to write it down.
• 17:34
  Speaker 1: If you can remember when it's due, write down when it's due.
• 17:37
  Speaker 1: And if you have a best guess on the amount, or if there's a way for you to look it up, start to look it up.
• 17:42
  Speaker 1: All right, so you want to be calculating this out for the next 12 months.
• 17:46
  Speaker 1: All right, so your irregular expenses that's the first thing that's going to go into your working capital account.
• 17:52
  Speaker 1: The second thing we want to look for is foreseeable disasters.
• 17:58
  Speaker 1: So most of the time, appliances don't just break out of nowhere.
• 18:02
  Speaker 1: It does happen.
• 18:03
  Speaker 1: It does.
• 18:03
  Speaker 1: So, don't you know?
• 18:04
  Speaker 1: Don't get me wrong, but most of the time they make a noise.
• 18:07
  Speaker 1: Most of the time you have an intuition.
• 18:09
  Speaker 1: Oh, my refrigerator's really been making some interesting noises.
• 18:13
  Speaker 1: I know that it's 20 years old.
• 18:15
  Speaker 1: It's probably, it's probably almost time.
• 18:19
  Speaker 1: Does that mean I'm going to go in immediately, throw my fridge?
• 18:23
  Speaker 1: No, no, it doesn't.
• 18:24
  Speaker 1: But it just means, hey, I see this coming.
• 18:29
  Speaker 1: So things like maintenance on your cars, maintenance on your appliances, maintenance on your house or anything that you definitely are guessing is going to need to be replaced in the next 12 months and you can just make a best guess.
• 18:42
  Speaker 1: You're like all right, my fridge, I think, will need to be replaced.
• 18:47
  Speaker 1: In the next 12 months I probably need to spend, let's say, $1,500 on refrigerator.
• 18:51
  Speaker 1: I haven't looked at refrigerator prices so I don't even know if that's accurate, but all right.
• 18:57
  Speaker 1: So I have $1,500 that I'm going to need sometime next year, all right, and you go through your life and you start to total those things up, all right, and don't get super far ahead of yourself.
• 19:07
  Speaker 1: If you know that your roof is, let's say, 15 years old, you have five, you know, and you have, you know, another five years and then you think it's going to need to be replaced, you could get ahead of yourself and you could start to put money aside for a roof separately.
• 19:22
  Speaker 1: Or you could, you know, or you could hold off a minute and make a plan a little closer to when that you know, when you, when you get to that bridge, if you will, if you make a plan out for the rest of your life, the number will be so big that you will horrify yourself, tell yourself that Bray Sedona was a crazy person, not do anything.
• 19:41
  Speaker 1: Okay, so 12 months max.
• 19:43
  Speaker 1: So don't you don't be getting, don't don't get super, super into the future around this.
• 19:49
  Speaker 1: If there's something very big like a roof.
• 19:50
  Speaker 1: Go ahead, but be careful to not let your mind get into the lifetime's worth of expenses, because that will not go well for you.
• 19:59
  Speaker 1: All right, so we have the irregular expenses.
• 20:02
  Speaker 1: We have the foreseeable maintenance, the foreseeable breakage, the foreseeable disasters.
• 20:08
  Speaker 1: Okay, then we want to think about things like family obligations.
• 20:13
  Speaker 1: All right, so sometimes people host big parties or they have birthday, birthday celebrations for their kids.
• 20:20
  Speaker 1: Most people have some sort of holiday gifts, weddings that come up, you know if funerals to pay for it, if that's a thing that you have to, you know that's on your list of obligations.
• 20:31
  Speaker 1: Travel, right, travel back and forth to go see family.
• 20:35
  Speaker 1: This is important if you don't live in the same place as your family and you have, especially if you have aging parents, you know, or there's a lot of reasons to go back to your hometown.
• 20:45
  Speaker 1: All right, so you want to look at all of this, all right, so I know, for example, I do Christmas morning in my house and generally Christmas morning.
• 20:53
  Speaker 1: I'm going to have a $500 additional grocery bill, so I need $500 for that.
• 20:58
  Speaker 1: So I set that aside ahead.
• 20:59
  Speaker 1: So that way, in December I'm not skimping on my gifts to be able to buy a prime rib.
• 21:04
  Speaker 1: Do you know what I mean you do, all right.
• 21:07
  Speaker 1: So you want to think about these things.
• 21:08
  Speaker 1: Back to school shopping.
• 21:09
  Speaker 1: If you have kids, you want to think about, even like clothes.
• 21:13
  Speaker 1: What's your annual budget for clothes?
• 21:15
  Speaker 1: You know you could do it on a monthly basis, but really I highly, highly, highly suggest clothes shopping between one and four times a year, depending on your needs.
• 21:24
  Speaker 1: You know, do we need new shoes?
• 21:26
  Speaker 1: Do the kids need a clothing budget?
• 21:29
  Speaker 1: You know things like that, all right.
• 21:31
  Speaker 1: So you're all of your family obligations, all right.
• 21:35
  Speaker 1: And then we do our self-care, our non monthly, our non regular self-care.
• 21:41
  Speaker 1: So let's just say, once a year I take a trip to the spot and it's really not negotiable.
• 21:45
  Speaker 1: I'm going to go for overnight.
• 21:46
  Speaker 1: I'm going to get a thousand dollars worth of services.
• 21:49
  Speaker 1: I'm going to put that aside.
• 21:50
  Speaker 1: So that way, that month I'm not putting in on credit or scrimping and saving.
• 21:54
  Speaker 1: You know, scrumping on groceries to go to the spot, all right.
• 21:58
  Speaker 1: So also later I'll tell you, for a period of time I have blonde hair.
• 22:02
  Speaker 1: Blonde hair is not my natural color.
• 22:04
  Speaker 1: It is a big commitment.
• 22:05
  Speaker 1: So maybe every other month, every, let's say, nine weeks even, I would go and I would get my hair dyed.
• 22:10
  Speaker 1: It was a couple hundred dollars, and so I would just be prepared for that.
• 22:15
  Speaker 1: I would just put that money into my working capital account.
• 22:18
  Speaker 1: So you want to total up how much money you're going to need in the next 12 months and then divide it by the number of paychecks that you get.
• 22:27
  Speaker 1: So for most people let's say that's 26 paychecks.
• 22:30
  Speaker 1: So let's just say, let's just say, for the sake of easy numbers, I need 26,000 dollars, which would be a very, very high number.
• 22:38
  Speaker 1: Right, I need 26,000 dollars in the next 12 months and I'm going to save a thousand dollars a pay check for that.
• 22:48
  Speaker 1: Now let's just say also that there is no way that I can do that.
• 22:52
  Speaker 1: Great, but I can do.
• 22:53
  Speaker 1: Let's say, 500 dollars a paycheck, and that's reasonable.
• 22:56
  Speaker 1: I'll get started there, because the other thing about life is sometimes we're prepared for something and then the dishwasher or the refrigerator doesn't break.
• 23:04
  Speaker 1: We get two years out of it.
• 23:06
  Speaker 1: We thought it was going to go, we started saving the money, we're prepared, and then we can either buy it now, just because it makes the funny noise, or we can.
• 23:16
  Speaker 1: We can wait and tell it all the way breaks.
• 23:18
  Speaker 1: It's up to us.
• 23:19
  Speaker 1: All right, all right.
• 23:21
  Speaker 1: So you want to build that savings habit.
• 23:27
  Speaker 1: That is a habit that you want to have in perpetuity, because that habit of projection and preparation and having money, that is the way that you stay out of credit card debt and, honestly, it's the way that you feel safe inside your body with your money.
• 23:45
  Speaker 1: Like I know for me that when my savings account has more than 10,000 dollars in it, I'm, in a way, different mental space than my savings account has like 300 dollars in it, and I've had both over the years.
• 23:56
  Speaker 1: Right, and when I have money in the bank I'm easier, like I'm easier with myself, I'm like all right, cool, if something happens, I have the money to take care of it.
• 24:09
  Speaker 1: It reduces my financial stress so much.
• 24:15
  Speaker 1: The other thing that happens as I do this is as I build trust with myself and with money.
• 24:20
  Speaker 1: So when I know that when I get paid, I put a certain amount in my work in capital account, what ends up happening is I start to trust myself with money.
• 24:28
  Speaker 1: I start to trust that the money is going to be there because I put it aside for these reasons.
• 24:34
  Speaker 1: I spend it for the reasons that I said I was going to, and in the meantime it accumulates and then it will drop.
• 24:41
  Speaker 1: Your account balance will drop back down when you have to use the money and then you'll watch it go back up, and that creates so much trust and safety in your body.
• 24:51
  Speaker 1: And when your working capital is fully funded, it's such a glorious day.
• 24:58
  Speaker 1: It feels so good because you know that your next year is basically ahead.
• 25:04
  Speaker 1: And I will tell you that that doesn't happen too too often, because a lot of times people are starting with something less.
• 25:11
  Speaker 1: But it is possible and people do do it, and I've had so many clients call me to be like Bri.
• 25:19
  Speaker 1: My hot water heater broke out of nowhere and I just had the money to fix it.
• 25:23
  Speaker 1: I just had the $6,000 in my bank account and I was just able to write the check.
• 25:28
  Speaker 1: I was able to pay for the emergency service.
• 25:30
  Speaker 1: I didn't have to get a hotel.
• 25:31
  Speaker 1: I didn't have to move out of my house.
• 25:33
  Speaker 1: It was an inconvenience, but it was not an emergency because I was able to immediately take care of it.
• 25:38
  Speaker 1: All right.
• 25:40
  Speaker 1: And so the thing about working capital the other thing that I like about working capital just a little bit better than thinking funds is that we're just going to use one fund for this.
• 25:48
  Speaker 1: We're going to think about the things that need to happen, we're going to set the money aside and then we're just going to have a little wiggle room with life, right, like, do I know when the refrigerator is going to break?
• 26:00
  Speaker 1: No, I don't, I don't know.
• 26:02
  Speaker 1: So I'm going to just set the money aside and I'm going to just get used to having the money and then when it happens, it happens.
• 26:10
  Speaker 1: But when it does happen, I'm going to have the money and I'm not going to have to rework my whole plan.
• 26:17
  Speaker 1: You know, I'm just going to use the money that's in there and it's going to be okay.
• 26:24
  Speaker 1: Now, sometimes people's working capitals, do you know, go cash flow negative.
• 26:30
  Speaker 1: That is a thing that happens.
• 26:32
  Speaker 1: So let's just say your third month into saving your working capital and that's the month that you need a big car repair All right, well, maybe you take some of the money, you take the money out of your working capital and maybe you have to put some of it onto your credit card and then you use your working capital to pay off your credit card for a month or two and then you're right back there.
• 26:49
  Speaker 1: You know getting ahead, but the reason.
• 26:52
  Speaker 1: So when, if you listen back to I forget exactly which episode it was, but we talk about credit card debt and getting off of the hamster with a credit card debt and we want to really focus on having money and projecting what's coming before we want to start really putting big, big sums of money towards our credit card debt.
• 27:13
  Speaker 1: And the reason is this because life is going to keep coming at you, expenses are going to keep coming at you, so, as you're prepared for that, that you don't need to keep going onto the credit, although you could, if you need to right, assuming that you have, you know, an available, available credit to use and that's what really.
• 27:32
  Speaker 1: But the it's the, it's the projection, it's the feeling prepared, like, oh, I see, I'm looking ahead, I'm seeing what's coming.
• 27:39
  Speaker 1: It's the preparation, it's the habit building and then that reinforcement of trust which creates such a different financial reality and situation than emergency funds, which just really do create a lot of stress, a lot of turmoil, and sinking funds.
• 27:54
  Speaker 1: Sinking funds are great, sinking funds and capital working capital they serve the exact same purpose.
• 27:59
  Speaker 1: It's just the method I like in working capital a little better.
• 28:04
  Speaker 1: It's the reason that I teach it, just because it gives a little bit more room for life.
• 28:08
  Speaker 1: It just gives a little bit more grace and it helps me to stay in a place where I could be in trust with myself, moving forward, excited, enthusiastic to to save, rebuild, save, rebuild or say, you know, spend, rebuild, while all saving the whole time, rather than a sinking fund where it's a little bit more start and stop and it's a little bit more separate.
• 28:30
  Speaker 1: So it just opens me up.
• 28:32
  Speaker 1: When life doesn't go exactly according to plan, that I'm going to have to use my mental energy to just rework that whole plan and then I really that can create.
• 28:43
  Speaker 1: You know the emotional sensations of just feeling disappointed or discouraged or like somehow you're bad at money, even though you're not.
• 28:50
  Speaker 1: You're doing great.
• 28:50
  Speaker 1: So that is my lessons for today.
• 28:55
  Speaker 1: I hope that you got something.
• 28:57
  Speaker 1: I hope that I really what I want to impress upon you is the way that you feel about money, your level of trust with money and your emotional state around.
• 29:03
  Speaker 1: Money is really, really important and doing things on purpose to reduce the stress in your body, to reduce the amount of emergencies, is a really, really great way to live.
• 29:18
  Speaker 1: You do not want to be spending your money on emergencies.
• 29:21
  Speaker 1: It just attracts more emergencies.
• 29:23
  Speaker 1: And I'll tell you what.
• 29:24
  Speaker 1: There's this energetic thing.
• 29:25
  Speaker 1: This has no scientific explanation, but I've been.
• 29:28
  Speaker 1: I've seen a zillion people's money and them in relationship to it.
• 29:33
  Speaker 1: And when you have a savings account that you save up to for a certain dollar amount that does not have a purpose, a specific purpose, and the money stops flowing in, that money gets bored and it will attract something to get out of that account.
• 29:48
  Speaker 1: So let's just say you have an emergency fund and that money needs an emergency to get out of there.
• 29:53
  Speaker 1: Oh, you'll have an emergency, you'll have an emergency.
• 29:56
  Speaker 1: But when the money's flowing in and out, the money has freedom to move.
• 30:01
  Speaker 1: The money gets a little break, it gets to take a rest in your bank account and being in relationship with money that way is really, really different.
• 30:13
  Speaker 1: Just imagine you go to somebody's house.
• 30:14
  Speaker 1: They put you in a room and they're like you're here for an undefined amount of time, nobody else is coming, we've closed the doors.
• 30:23
  Speaker 1: They're like well, you're just sitting there, maybe in a room full of people, maybe by yourself.
• 30:27
  Speaker 1: It's creepy, it's weird.
• 30:28
  Speaker 1: But if you're at a party and people are coming and going, you're free to leave.
• 30:33
  Speaker 1: You're free to go.
• 30:34
  Speaker 1: There's going to be a reason to come, a reason to go.
• 30:36
  Speaker 1: It just flows different, and so that's a weird little metaphor for you, but really, when we incarcerate our money and savings accounts like that, oh, they attract emergencies.
• 30:47
  Speaker 1: They do, they do.
• 30:48
  Speaker 1: I promise you All right.
• 30:49
  Speaker 1: I love you, I appreciate you.
• 30:51
  Speaker 1: I hope that you learned something.
• 30:52
  Speaker 1: Please feel free to share this with a friend.
• 30:55
  Speaker 1: Please leave a review on my podcast.
• 30:56
  Speaker 1: It helps us to get the word out to more and more people and I will talk to you next week.
• 31:02
  Speaker 1: It was my pleasure and joy to talk with you today.
• 31:09
  Speaker 1: Thank you for listening.
• 31:10
  Speaker 1: If you found value in our conversation, I kindly ask you to share the show with a friend who deserves to unleash her financial power.
• 31:17
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• 31:22
  Speaker 1: Together, we can amplify the message and bring more money into the hands of good women For ongoing guidance and unwavering support on your financial journey.
• 31:31
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• 31:33
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• 31:37
  Speaker 1: Join to become part of our powerful community of women, where we uplift and inspire one another to reach new heights of financial success.
• 31:47
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• 31:56
  Speaker 1: Embrace your financial power, create the life you desire and let's ignite a movement of Cash Confident women who are transforming the world.
• 32:05
  Speaker 1: One dollar, one decision at a time.