Here’s the thing, “money doesn’t buy happiness.” That what poor people may tell you. Yes, many poor people are very happy with their life. However, I believe that being a well prepared middle-class person/household has HUGE advantages for you. In being well prepared, I am specifically talking about having a cushion—a buffer— in your savings accounts.
I keep hearing a six-month emergency fund is very important (…in an economic downturn). I’ve noticed as the economy improves (for many, not everyone) that “a three-month emergency fund” is the new target. Side note: I believe this smaller number is to make us feel better and more optimistic that we can get to three months. It’s much like the “exercise for 30 minutes most days of the week” became “exercise 30 min three times per week. A three day per week goal seems more attainable. Yet, don’t you really think that “moving” and being somewhat active every day is better for your body? Don’t settle for less. Aim for the minimum (“three”) but continue strive for what may be better, in this case, “six.”
OK, back to making your life easier. If you have little or no savings and you have things break around you, isn’t that stressful? You might say, “what are we going to do” or “how can we possibly deal with this?” I can tell you from experience—multiple times these past two weeks—that when these problems occur, I just said: “that sucks, well, let’s take care of what we can ourselves and pay to fix the rest of the required items.” This applied to my dead cell phone, a car failure, a pet issue, and a home repair.
Having the funds available to resolve the issue gives you the power over the resolution plan and therefore closure of the issue. If you borrow the money, the issue is resolved, but the bill may linger on and on, adding stress. Stress is the opposite of easy.
Here’s a FIRE perspective, I have a VERY flexible schetchle . This allowed me to try and do some of the fixes myself, and then take my time to find the right person to help me with the rest of the work. I also was able to negotiate a little lower rate by allowing them to work other high priority calls first.
How to do this: Pay Yourself First. Have your direct deposit send a portion to a savings account. If this savings account can be at a different bank, even better. That will make it harder to slip some of that savings into your check/debit card account. You can always transfer from Bank B to Bank A, but it may take1-4 days to arrive. This is a different kind of saving buffer, almost like a usage protection buffer.
If you don’t want to use two banks, set up a savings account at your main bank, and put that money aside immediately. Some people create multiple savings accounts with names like emergency, vacation, TV/smartphone, house improvement, etc. Be careful of bank fees. There are many new FinTech companies that will help you setup these saving locations.
Side Note #2: I just realized that what I’m saying is save up, then spend. This is basically the delayed gratification idea that has immeasurable value in your life. It’s the exact opposite of the buy now, pay later, oops mentality.
Just do this, save $100, then get that up to $500, then up to 4 figures. Try NOT to spend it, but grow it. If you are paying credit card interest, get rid of that debt $100 at a time. Save the money for one month, then when you are saving month number two use essentially month 1’s money for the credit card debt.
Money is your power punch to make your life easier. It takes time to build your power, but it will happen. Instead of buying something you don’t need (Amazon boxes at your door…) save a chunk, buy a little, and balance.