Any financial expert will advise that small business owners and individuals should build an emergency savings account, and I absolutely agree. Everyone should have 3 to 6 months’ worth of living expenses tucked away. Farriers need a year. What is a year’s worth of living expenses? It’s different for everybody. You should be able to look at your budget and know easily. What’s your monthly budget times 12 at the end of the day?

Why do you need an emergency savings? Everybody has a story about getting hurt and some of these stories are horrific. There’s just not a lot of coverage for us.

If I get into trouble, I don’t want the burden of getting into a huge debt load on top of whatever else I have going on.

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Smart Money: The Good, The Bad and the Ugly of Business and Personal Debt

Davis, Calif., farrier Shane Westman has seen firsthand how debt can cripple a farrier practice and personal life. Earlier in his career, he was in debt in his business and private finances. Register for the Farrier Business Success Academy to watch his presentation in which he'll discuss practical business advice to avoid and eliminate debt. He will also explain the benefit of good debt vs. bad debt. Register now »

A Pew survey of more than 7,800 households found that most have failed to build enough liquid savings outside retirement accounts to respond to emergency needs. Yet, 60% of households experienced a financial shock in the past 12 months. It happens. It’s happened to me, a couple times. You have to be prepared.

When I talk emergency expenses, I’m not talking just getting kicked in the head, which is absolutely an emergency. My mom was at a horse show on the other side of Washington state and she had a brain aneurysm blow. They couldn’t airlift her across the mountains, so she ended up staying on the other side of the state for 6 weeks, so I was traveling back and forth. She was in a coma for 3 months.

Thank goodness I had emergency savings because that paid my travel expenses.

Where do you put it? You put it in a separate bank, or at least a separate account. I opened an online bank account, which is kind of scary because you can’t run in and say, “I want my money,” or talk to an employee. Mine is with one of the first online banks, which earns 10 times the national average. The national average savings account is still about 0.5%. I’m getting 2.2% in just a basic savings account. My year’s worth of living expenses was getting bigger every month.

I still want my money working for me. I want it accessible, but I don’t want it where I can see it. When you look at that big, fat account, you start thinking that new truck’s not that bad. It’s untouchable money, except for emergencies.

It doesn’t need to be a huge start to get there. And once you’re there, debt free will make it all the better for you and your small business.

Gain more insight from Shane Westman by reading, “How to Avoid Debt in a Farrier Practice” in the November 2019 issue of American Farriers Journal.