How an Emergency Fund Saved My Sanity

Sometimes, I wish I were a different kind of person. Given my druthers I’d be a cross between the cool, suave Robert Redford and the brash, devil-may-care Charlie Sheen. Of course, I’m totally not like either of these two. I tend to be stressed out, neurotic, a worrier and prone to pessimism (or realism, depending on your outlook). I wish I had self-identified this way a lot earlier in life because it would have helped me make better financial decisions.

In previous articles I looked at psychology as it pertains to financial management and to credit card use. And psychology is, I believe, the most important factor to understand and get control of if you want to be successful with personal finance. But does it work the other way around as well? Can good personal finance practices positively impact your psychology?

In Some Ways, It Sucks To Be Me

If you are like myself and tend to be on the more highly-strung side of things, you can probably appreciate what I mean when I say my life has had a high level of background stress. In high school I stressed about getting homework done, my grades, and getting along with other kids. When I went to work I was stressed about making my employer and clients happy. I always worried about not being good enough. And I worried constantly about losing my job. As a husband and father I worried I’d mess up my wife and son irreparably (the jury is still out on that one!). I worried from the time I woke up until I closed my eyes at night.

To be clear, this is not a healthy way to live. I ended up with recurring ulcers and ongoing health issues. More importantly, I rarely ever felt clear-headed, happy and calm. If you identify with any of this, think long and hard about what it will take to get out of it. It’s not doing you any good.

The good news is that, as I got older, I started to realize that a lot of my background stress was caused by my own bad decisions. And it dawned on me a few years ago that a lot of the things I stressed about had an obvious solution, and that solution was money!

Now, I’m not talking Howard Hughes or even Snoop Dogg levels of money. That wouldn’t be helpful at all because that will never be me. But what I learned was that clearing up a lot of my stressors could be accomplished with modest amounts of money, managed properly. Up until this point I had never prioritized savings, I was heavily in debt, and I had absolutely no financial cushion. It was time to turn the corner.

A Shock Absorber For Stressed Out People On Life’s Bumpy Roads

When I first started getting serious about my finances, I finally took the advice I had given to so many other people: priority #1 is an emergency fund. Before anything else, you get this together. Before long, I had a few thousand put away. Then a few more. And before too much time had passed I had saved the equivalent of three months of net income, which was my objective.

Looking back, this was a significant turning point in my life. A lot of my background stress started to ease and many of the things I had spent literally years worrying about suddenly didn’t seem so important.

Job loss? Who cares. We have a great unemployment system where I live and I have a bunch of extra cash. I could be off for a year without breaking a sweat. Still holding a lot of debt? No worries, I can cover us even if we come up short the odd month. Car breaks down, dishwasher breaks, kid knocks a tooth out? No worries, it’s covered, in cash.

The joy of financial freedom, helped by an emergency fund.

Sun On Your Face, Wind At Your Back

Even more significantly, once I stopped being constantly hounded by stress, it was amazing how much more confident I became. I was free to try new things, to set new goals, to push for the things I really wanted rather than settling. I stopped clinging on to what was safe just because I was terrified my world might blow up on me if things didn’t work out perfectly.

Having this cushion was a big part of what gave me the confidence to leave a long-standing career I hated and try something totally new. True enough, by that time I had saved a fair bit more than just three months of income, but that emergency fund was still a big contributor to the courage I needed to make the change.

I can confidently state that this one act of financial prudence has had a larger positive impact on my family than any other financial accomplishment we have had since. More than building our retirement accounts, and more than paying down debt. This despite the fact that those latter activities have involved much larger dollar amounts.

Start Now – Even Just A Little Bit

And the great thing about an emergency fund is that it doesn’t take much to get started. Start putting whatever you can afford into a high interest savings account. Set goals for yourself to reach in 3 months, 6 months, and longer. Set a final dollar value that you want to ultimately attain; an amount that is just enough to give you a sense of security and stability in your life.

Remember, this won’t be all the money you’ll ever save, but it should be the first money you ever save! And if you are at all like me, it may be life changing.

Important Disclaimer: the information above is for general informational purposes only and does not in any way constitute an offer for the purchase or sale of any security and is not intended to be considered comprehensive or personalized financial or investment advice. assumes no responsibility for the use or application of this information. Always consult a tax, investment, or other appropriate professional before adopting any new financial strategies.

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