Why You Need A Get Out Of Jail Account – And How Much Should Be In It
What would happen if you lost your job tomorrow? How would you manage an unexpected high-ticket emergency? Could your current financial situation cope with that kind of pressure – without relying on a credit card or savings?
If you’re like most millennials, the answer is NO. A lot of millennials are just a couple paychecks away from a financial crisis. It’s not your fault. When you create a lifestyle that demands a guaranteed income level, you get reliant on that figure coming in. What’s more, if you’re living to your monthly income, there’s little flexibility to cope with an emergency.
It’s easier to bury your head in the sand and assume that money will always be there. It’s less painful to bank on the past being an indicator of your future.
But what if it isn’t?
How would it feel to create a position where you could ride uncertainty without going under. Imagine being able to navigate redundancy, a career change, or the need to buy a new car with zero stress or pressure.
That’s true financial freedom, and it’s possible when you build your Get Out Of Jail account. I’ll explain how to create yours in this article.
What is a Get Out Of Jail Account?
A Get Out Of Jail account is ring-fenced money ready to get you out of a tight spot – so you don’t have to worry about money should a crisis arise.
This money is for real emergencies only. It’s not for holidays or a house deposit, or to cover Christmas. And it’s definitely not to cover that huge credit card bill you ran up last month because you weren’t intentional with your personal spending!
Instead, your Get Out Of Jail money is there so you can deal with an unexpected drop in pay or a mammoth bill you couldn’t have predicted, such as:
- Forced, unpaid leave
- The need for a new boiler
The deal is you can’t touch this money, spend this money, or ‘borrow’ from this money – unless you need it to ‘get out of jail’. It takes discipline to build this account, and it can take a while to accumulate the amount that gives you real peace of mind. But once funds are in place, you create a level of financial security that’s hard to put a monetary value on.
How a Get Out Of Jail account helps create financial freedom
Most people want to be financially free because money worries are a huge source of stress, arguments and negative thinking. But what does it mean to be ‘financially free’?
Most people think it means having a ton of money in the bank so you can do whatever you want and never have to worry or think about money again.
This definition is right, but only to a point.
To ‘never have to worry about money again’, you need confidence and certainty that your day-to-day and lifestyle costs will always be covered. Because most people live to their income, this means wealthier people need more money to create this certainty. In other words, just because you have a ton of money in the bank doesn’t mean you’re financially free! The real question is how long your money would last if you suddenly lost your primary source of income?
A Get Out Of Jail account helps create financial freedom by giving you a buffer to lean on should your financial situation change. It enables you to protect your lifestyle when you’re navigating choppier waters. It creates certainty during uncertain circumstances and gives you breathing space to figure out and plan your next steps.
How To Build Your Get Out Of Jail Account
When you’re ready to build your Get Out Of Jail account, follow these eight steps:
- Decide how much you need?
Ideally, your Get Out Of Jail account should have enough funds to cover three months’ worth of expenses. You can approach this from two levels:
- An amount to cover the essentials
- A higher amount to cover your lifestyle [this option is best]
What is each figure for you?
- Get real with the timescale
If you don’t already have savings or an emergency fund, the figure you need may feel daunting and even unachievable. Don’t let that put you off. Building a Get Out Of Jail account is a medium-term strategy. It can take years to accumulate the amount you need – and that’s OK. The priority is to open one and build it.
- Save each month
How much can you save each month for your Get Out Of Jail account? Review your monthly budget and decide your figure.
- Commit to the plan
It’s one thing to know you need this account; it’s another to follow through with the idea. Financial wealth is as much about behaviours and mindset as it is strategy and knowledge. There will be times when you’ll be tempted not to save the money. You’ll tell yourself ‘I’m only skipping one month, it doesn’t matter’. But it does.
- Start today
Decide to start today. The target figure may seem huge, but it’s never too soon to start [and money compounds and grows exponentially]. When facing an emergency, something in the account is better than nothing.
- Open a separate account
Make this money hard to spend by keeping it in a dedicated account – then don’t touch it!
- Automate monthly payments
Set up a direct debit to your Get Out Of Jail account, so your monthly payment goes there automatically without you having to do a thing.
- Review periodically
Remember to review your Get Out Of Jail account anytime your circumstances change. For example:
- Could you use some of your bonus to top up your fund?
- If you got promoted, could you increase your monthly payments?
- If your lifestyle changes, does your Get Out Of Jail fund need more money?
Ready to cut your financial worries?
It’s one thing to worry about a dinner date you can’t afford. It’s a different beast entirely if you can’t cover your monthly outgoings.
It’s why all our members are building their Get Out Of Jail account.
If you’re ready to do the same, book your Intentional Living Strategy Call with a Wealth Enhancers coach. We’ll help you kick-start an international conversation with your money so you can feel happier, abundant, and free.
Disclaimer: all information contained within this article is of a general nature. Do not rely upon it when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.