Emergency funds, that infamous 3-6 months of living expenses that are supposed to cover you in the event of a job loss, or some other unexpected event. Financial planners long have advocated them as smart financial planning. They are right, but they are DEAD WRONG on 3-6 months. That may have worked before the 2000’s, no longer.
Strive for 12 months…..the economy is changing too rapidly to be covered for less….
I would argue the following for people that have less than 3 months of living expenses (the majority of folks):
- They are ultra-tentative. They play it safe and lay low.
- They “tense up” in confrontational situations. They may avoid conflict all together. Impossible to perform in business, sports or any profession when you’re tight vs. loose.
- No bold risk taking. Striking out often comes with swinging for the fences. Failure is avoided at all costs when your paycheck to paycheck.
- They live by OTHER principles, not their own. When you operate under someone else’s rules vs. your own, will you be more happy or less?
- They have an overwhelming tendency to stay “under the radar.”
IF you agree that the above points characterize those without a cash cushion, than wouldn’t the opposite be present for those WITH one?
So let’s think about this: Having a strong cash cushion, close to 12 months of living expenses means you are MORE likely to…..
- NOT be content with flying under the radar, they want to be “in the mix.” High profile, big projects that matter, even with small likely-hood for success
- Embrace conflict, even if it’s messy
- Have a clear vision of how you want to contribute, related to the business goals.
- Are OK taking risks and playing loose.
Is it fair to paint this “opposite” portrayal simply due to one’s checking account/liquidity? Of course not! It is one element of many that starts to tilt the deck in your favor….
Doesn’t it make sense that FEAR is a detractor in your pursuit of EXCELLENCE when it comes to performance? Financial IN-security fuels fear. Build your emergency fund and start playing loose.