Long-term vs Short-term savings

The first step or priority in establishing financial freedom is to be debt-free. The second priority is to build a contingency fund (short-term savings) for future needs. The third priority is to build financial freedom through investments. Many people want to pass over the process of building a contingency fund and go directly into investing (long-term savings). Do not get confused, your contingency fund and your investments are not the same. They should be handled and managed as two separate accounts. For us to be wise stewards of God’s money, we should have adequate funds set aside in a separate savings account for short-term uses. Unexpected expenses are not only emotional letdowns, but they can cause a painful financial hardship if funds have not been set aside to cover them. Proverbs 22:7 says: “Just as the rich rule the poor, so the borrower is servant to the lender.” Even if you have a contingency fund, there is little escape from personal or family difficulties resulting from financial emergencies. But when there are crises or unexpected emergencies, much frustration can be avoided if a savings account has been established to help absorb part or all of the financial blow. Your contingency fund serves as a cushion to help you deal with unexpected and unplanned expenses.

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