What does financial freedom mean to you?

We typically start our financial journey by being financial dependent.  Our parents/guardians will pick up the tab for our food, clothes, education and entertainment.

Once our full-time education is completed, we generally move into the second money phase financial solvency.  We earn our own money, pay our own bills, and create and payoff debt. It is living pay cheque to pay cheque.  We are living around our means, that is, we pay off our debt and if we do manage to save any money, it is spent on holidays or entertainment.

Lots of people spend their lives living in financial solvency.  If you are in paid employment, financial solvency can be seen as a version of success.  You go on holidays, pay into a small pension for your retirement and live your life.

For those of us that have gone down the independent root of working for ourselves, the lack of monthly income can cause a lot of worry and heart ache, particularly at the beginning of your entrepreneurial journey.  The lack of a regular income can come between you and your sleep!

Creating an emergency fund is a way of dealing with this anxiety.


What is an emergency fund?

An emergency fund is money you set aside for an event that could potentially see you in financial trouble. For example, unexpectedly loosing your job, or having to take unpaid leave or anything else that puts your monthly income in jeopardy. You emergency fund, gives you time to breath and sort out a long term plan.

Having an emergency fund gives you the peace of mind, leaving you with the headspace to deal with the emergency itself and not worry about how you’re going to survive financially.

Financial Stability

When you are at the point that you can start building an emergency fund, you are moving into the third money phase – Financial Stability.

This phase is critical to building your personal wealth.  It’s where you are living below your means, you are able to build up 3 – 6 months of expenses and keep to one side in case you need it.  Studies have shown, people who have these emergency funds have less money anxiety and have better piece of mind – who doesn’t love that!


How much should your emergency fund be?

While a person’s emergency fund will vary from situation to situation, most financial experts agree that an efficient emergency fund should hold between three to six months of monthly expenses.

Emergency funds are the backbone of strong personal financial plans.  However, it is worth pointing out, that emergency funds are not savings for big purchases like houses or holidays.  They are built up over time and you can put as much as you can afford in each month. Fu

How to get started

Start small.  Work out what you can afford to set aside each week/month.  €100 saved consistently is better than €1000 ad hoc.  This smaller goal is much easier to reach and allows you get a win when you reach €500. €1000.  Once you establish the small emergency fund, you can handle life’s small emergencies without going back into debt. This allows you to focus on gaining momentum when it comes to saving money rather than switching back to focusing on paying off debt incurred by small emergencies.

How do I determine what number to use for my monthly expenses?

While monthly expenses will vary from person to person, you’re basically ensuring that you could continue to live your life without bringing in any income. Some people make sure their emergency fund can cover luxuries while others stick to a more bare-bones emergency fund that provides just enough money to pay the bills.

It’s up to you to decide which monthly expense number you want to use; you do need to make sure that you include your business expenses as well.  Here is a blog I did earlier https://carmelseery.com/blog/get-the-basics-right/ about working through your expenses.

I wold suggest going through your last 6 months bank statements and working out, what expenses are exential, what expenses are nice to have and which expense you can do without.  Add up your essential expense and nice to have and that figure is a good place to start.  Make sure you pick a comfortable number that won’t make you feel stressed.  Creating an emergency fund for the first time needs to be easing your anxiety not creating it.

How to get ahead!

The key word of 2020 for businesses is CASHFLOW.  The companies that were living from month to month, unfortunately are less likely to make it through COVID-19, than the businesses that had good cash management in place.

To have good cash management in your business You need to be able to answer the following questions

  • How much €€€ recurring sales each month
  • How much €€€ expenses each month
  • How big is the gap?
  • What plan is in place to close the gap

In order to have a working plan in place, you need to have a 12-month Cash Forecast

Cash forecasting is looking what is sales income is coming in by month over the next 12 months

And what expenses are going out over the same period.

Cash forecasting

  1. Plan for the next 12 months (It is good to look at the next year,  although it may be hard for some people to know what sales might come in fill in what you can and see the gaps)
  2. Take in blocks of 3 months
  3. Understand exactly what to expect in the next 3 months. (the next 3 months should be in greater detail than the last 3 months of next year)
  4. Watch the gaps

Cashflows are excellent at highlighting potential problems.  Where you know you have a big bill coming in, it will help you focus on watching your bank balance.

Review is key.

Check forecasted figures against what you have actual spend during the month.  Did you make all the sales you thought you would – if not, why not, did you spend what you thought you would, again if not why.  The more time you do this, the more insights you will get into the story of your business.

Need some help?

For 2020 I am running at a discounted rate Create Your Cash Fountain, where I will set you up with a 12-month cashflow and the tools to keep on top of it.

Where to find me:

Free Facebook Group 

Contact me 


Next week, week 5 of 10 – I’m running a free Webinar to help you on your create your cash foundation journey. It is on Monday 28th of Sept @ 8pm. Grab your spot here

Register before Friday 25th to get your free workbook!

Chat soon.


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