The Value of An Emergency Fund is NOT Just For Emergencies
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….