SHTF Money: Creating a Plan for When the Unexpected Happens

The general rule for an emergency fund is six to nine months’ worth of expenses — although some experts believe it should be six to nine months’ worth of net income — but only 25% of Americans, according to a recent Bankrate.com study, have the minimum requirement. Additionally, only 39% have enough savings to pay for a $1,000 emergency before acquiring a loan or using credit. That is not good enough.  In an actual SHTF economic situation, how long would you last? Do you have enough money to survive and wait out the crisis or prepare for your next move?

The SHTF Money Plan

Creating a money plan is a straightforward process, but it takes discipline and commitment. Before you can start planning for savings, you need to take a hard look at your finances. How much money do you have coming in, and where does it go? 

To keep track of your money, you need to create a spending log — don’t worry too much about making cuts at first. Record every dollar you spend, even for that $1.50 candy bar at the local gas station. A thorough spending log will help you understand how you spend money. For many people, logging their money is enough to curtail some bad habits.

Continue to log your spending habits for a month. After you have a month’s worth of information, go through your logbook and divide your spending into two categories: needs and wants. Needs would consist of mortgage payments, rent, insurance, gas, food, etc. Wants would include spending on entertainment, clothing accessories, eating out, etc. 

With the final calculations, you want to look at your wants and needs lists to determine if there are any areas you can cut spending. For example, if you are eating out a lot, consider limiting such occasions to once or twice per week.

The idea is to make necessary cuts to create a surplus of available cash. The excess should be put back into a savings account. Every month you will contribute to this savings until you build your emergency or SHTF reserve. Saving takes time, and it can and likely will require patience. Obviously, the more you sacrifice, the quicker you can save, but remember that you need to live, too.

Why You Need an Emergency Fund

Emergency funds are paramount to survival and preparation. No one knows when financial troubles will arise, whether personal, national, or global. You can experience job loss, or the economy can collapse, war can lead to shortages, etc. An emergency fund means you can better survive the temporary or more permanent threats.

The Right Amount of Savings for Your Situation

The right amount of savings varies from individual to individual. Your SHTF account might only require a few thousand dollars to get through six months, especially if you have a live-off-the-land mindset and a stable inexpensive homestead. 

For most people, however, a minimum of six months’ worth of expenses is a good starting point. It is crucial to understand this is a bare-bones strategy; you will not have any extra money for entertainment or unexpected expenses. Therefore, while a decent strategy, it is better to plan for six months’ worth of your net income — better still, nine months. 

There is no quick path to building an SHTF money stash; it requires patience and discipline. Take a hard look at your spending habits and make cuts you can live with. Commit to putting back a specific percentage of your income toward your emergency fund. You can do this.

Got any pointers? Leave a comment below.