Life is not always a bed of roses, for sure. There are ups and downs and this is what makes the journey interesting. The year 2020 has been a testament to this – many people lost their loved ones, many more lost their jobs. Entrepreneurs who had spent their lives building something from scratch had it wiped off in a matter of days! Mental health for many became the biggest issue.
Even without this pandemic, I have seen every now and then, where something terrible happens to someone (illness, accident) and suddenly the family struggles because the main breadwinner is unable to work and/or needs to care for family.
In terms of financial security, it is possible to navigate uncertainty to a certain degree by creating an ‘emergency account’. Let’s call this your ‘bed of roses’ account. Technically, even if it doesn’t help you live in luxury, it will at least help you cover the basic costs for a certain period of time – like a bed of roses that you can fall upon when things don’t go as per plan.
It helps you focus on bigger things in life and not worry about, “what if X happens”?
And if you don’t have this yet, it’s ok. It’s never too late to start. Focus on what is possible and how you can get this happening.
- Know what your monthly expenses are (both fixed and variable)
- Calculate how much you need to live (at least six month’s worth)
- Create a timeline on how long this will take (there is no need to be miserly, but also try to push yourself a little to achieve this as quick as possible)
- Open a separate savings account for this purpose – name it ‘bed of roses’ because it sounds beautiful
- Direct 10% of your pay (or whatever you can) into this account
- Automate the previous step, so you don’t need to think about yet another thing to do!
- If possible, DO NOT get an access card to this account, so you can’t withdraw this money for fancy purposes.
- If you get a bonus or reimbursement from ATO, make sure you transfer to this account (to achieve your goal faster)
Now, that you are on your way to creating a safety net for you (and your family), you can have some peace of mind. It may take months or years, but that is ok, because getting started is the first step.