Become your own Bank!

One of the benefits of following God’s financial principles over time is that we become our own bank. I have seen the benefits of this in our own family and want this to become a reality for each of you. 

Step 1 - Setup an Emergency Fund of $1000

Once we have started our budget and have adjusted our expenses to be lower than our income consistently each month, the first step in building our bank is to establish an emergency fund.  

If you still have Consumer Debt (i.e. - credit card balances, car loans, etc. ) then start with just a $1000 emergency fund. The point of the emergency fund is to help you avoid the need to borrow when surprises happen (i.e. - the car breaks down, the fridge breaks down, etc.). Setting aside $1000 can seem overwhelming at the beginning of your journey, but if you are creative you will find a way. For example, you can sell some items you don’t need any longer or work some overtime.   

Step 2 - Payoff all Consumer Debt

Use your monthly surplus (income less expenses) to payoff all Consumer Debt.  Start off with the smallest loan first, and then when the first loan is paid off focus on the next smallest loan until done. Most people can completely pay off all Consumer Debt in less than 3 years. 

Step 3 - Increase Emergency Fund to 3 months of expenses

Once your Consumer Debt is payed off you will increase your Emergency Fund from $1000 to 3 months of household expenses, which typically will give you an Emergency fund of between $10,000-$15,000.  

Step 4 - Save for all major purchases 

With your Emergency Fund in place and Consumer Debt paid off, you can use your monthly surplus to begin saving for major purchases so you never need to borrow again. Examples are:

1. Car replacement - use what you had been spending on a monthly payment to save for your next car, and buy your next car with cash.

2. Vacations - save in advance for all trips

3. Home Maintenance

4. Children’s Education 

Keep the funds for your Emergency Fund and various long term saving categories in a liquid savings account that is always accessible to you. It may feel like you are not optimizing your interest but it is important to maintain flexibility in case you need these funds.  

Once you have been following the above process for a few years, you will find that you consistently have the funds you need without needing to borrow from a financial institution or a credit card company. You will get used to having a savings account with a significant balance. You will be your own bank!!

“If you work hard at what you do, great abundance will come to you. But merely talking about getting rich while living to only pursue your pleasures brings you face-to-face with poverty.” Proverbs 14:23 TPT

Todd Payne

The Path Forward Financial Inc.