The following is a guest post
Where you live, surely it rains at least sometime of the year, right? Well, maybe if you’re in one of the most arid places on the planet, wet weather may not apply to you. But for most of the rest of us, we know that inevitably there will be rain and some bad weather here and there. That concept might also apply to our finances.
Our lifetime of money management doesn’t always include sunny days, so to speak, where everything happens in perfect form. Just like with the climate in most locales, there are some times where things are “rainy” and don’t go according to how we want them to go. Just as we handle bad weather by having jackets, hats, umbrellas, etc – we need to handle bad things happening financially. Whether it be a job loss, divorce, health issue, accident, or some other malady – things happen.
This whole conversation about bad weather/bad life events might not sound super positive at first glance, but it’s really not a negative viewpoint either. It’s neutral. And, it’s realistic. There are inevitably some challenges that we might encounter in life when it comes to money, even if they seem far fetched and we can’t quite predict what will happen.
Statistically, there have to be probabilities out there about people dealing with some kind of issue. While any one problem might have a very tiny likelihood of happening, the odds of something happening are certainly a bit higher, right? It makes sense.
That’s why it’s important to save for a rainy day. You know the rainy days will come. If you plan properly, you can be able to handle many conditions, even if not all. This means that we should:
- Make sure that we pay ourselves first by saving
- Try to maximize the gap between income and expenses
- Put aside enough for a true emergency fund – say, 9 to 12 months if possible
- Accumulate more than we think we need
The latter is particularly important. Many people think short-term, and don’t anticipate problems or other needs beyond the day-to-day. Maybe some goals are taken into account, but not life events and other issues. It makes sense to think holistically, and realize that our needs change in life – and often in terms of needing more money that we would otherwise anticipate. Managing our money along those lines seems to make sense.
What do you think?
Do you think most people truly, adequately save for the proverbial rainy day? Is this general concept something you think about?