As someone who works in a skilled trade, you know how essential it is to have the right tools, equipment, and materials to do your job. But what about your financial tools? Do you have an emergency fund to help you weather unexpected expenses or income disruption? If not, you risk financial instability and hardship.
An emergency fund is a stash of cash set aside to cover unexpected expenses, such as a medical bill, home repair, or job loss. It should be enough to cover at least three to six months of living expenses for you and your family. Here are some reasons why an emergency fund is non-negotiable for financial stability in the skilled trades.
1. Unstable Income
One of the biggest challenges of working in the skilled trades is the unpredictable nature of the work. Your income can fluctuate from month to month, and you may not always be able to find steady work. According to the U.S. Bureau of Labor Statistics, the 10-year job growth projection for construction and extraction occupations is 4%, slower than the overall job growth average of 5%.
Having an emergency fund can help you bridge the gap between jobs or when you are waiting for payment on an invoice, preventing you from falling behind on bills or going into debt. It can also provide peace of mind, knowing that you have a financial cushion to fall back on if times get tough.
2. Costly Equipment and Tools
Whether you work in construction, HVAC, plumbing, or electrical work, you rely heavily on specialized tools and equipment to do your job. These tools can be costly, and if they break or need replacing, it can be a significant expense. According to HomeAdvisor, the average cost of a new central air conditioning unit and installation is $5,495, while the average cost of a new furnace and installation is $4,255.
While you may have insurance to cover some equipment-related losses, it may not cover everything, and it can take time to receive a payout. Having an emergency fund can help you cover unexpected equipment and tool costs, so you don’t have to go into debt or use credit cards with high-interest rates.
3. Health Emergencies
As a skilled tradesperson, you often work with your hands and your body, which can place you at higher risk for injuries and health problems. According to the Centers for Disease Control and Prevention, construction workers have the highest rate of fatal injuries compared to other industries, with falls being the leading cause of death.
If you are injured or become ill and are unable to work, having an emergency fund can help you cover medical expenses, such as copays, deductibles, and prescription costs, as well as living expenses, such as rent, utilities, and food. It can also help you avoid taking on debt or dipping into your retirement savings.
4. Multiple Income Streams
Many skilled tradespeople have multiple income streams, such as owning their own business or working as a contractor. While this can provide flexibility and the potential for higher earnings, it can also make it more challenging to track income and expenses and plan for the future.
Having an emergency fund can provide a safety net for unpredictable income streams, so you don’t have to stress about keeping up with bills or expenses. It can also give you the flexibility to take advantage of opportunities, such as expanding your business or investing in new equipment or technology.
5. Market Fluctuations
The skilled trades industry is subject to market fluctuations, such as changes in demand, competition, and government regulations. For example, if there is an economic downturn or a shift in consumer preferences, it can impact the volume and type of work available, which can affect your earning potential.
Having an emergency fund can help you weather these ups and downs, so you don’t have to worry about financial instability or losing your business or job. It can also provide a cushion to help you pivot your skills or services to meet changing demand or take advantage of emerging opportunities.
Bottom Line
Working in the skilled trades requires skill, dedication, and resourcefulness. But it also requires financial stability and preparedness. An emergency fund is non-negotiable for anyone in the skilled trades, providing a safety net for unpredictable income, expensive equipment, health emergencies, multiple income streams, and market fluctuations. By prioritizing your emergency fund, you can protect yourself and your family from financial hardship and have the peace of mind to focus on your work and your future.
> For one on one or group assistance with personal finance, STR recommends that you check out the following resources:
> Inaccuracies with Bureau of Labor Statistics (BLS) data: Many of our blog posts will quote BLS data. SkilledTradeRescue.com has been able to identify that data quoted specifically for Skilled Trades can be as much as 50% LOW in many USA labor markets. For more information on these inaccuracies please visit the STR national labor survey page at the link below. On this page there is a video containing the latest information at the top of the page as well as other information. If you currently work in skilled trades, PLEASE consider participating in our national labor survey.
