Day 178: Almost Full

Live every day as if it were your last, because you never know when everything could be snatched out from under you.

We’ve been told time and time again that we should savor every moment and live in the present. At the same time, it is positively foolish to neglect planning for the future. Many people take their income for granted, so what happens when those paychecks stop coming every two weeks? Do you have enough in your savings to weather the storm?

Savings: Not Just for Rainy Days

Many financial planners suggest that you maintain an emergency fund. The recommendation varies anywhere from three months’ worth of salary to a whole year’s worth.

Through no fault of your own, you could lose your job tomorrow. If you are a small business owner, as would be the case with all my fellow freelancers, setting aside a rainy day fund should always be a priority as we are prone to the “feast or famine” cycle.

Given the hypothetical scenario where your income falls to zero tomorrow, how long would you be able to survive on savings alone?

I posed this question to my social media following a short while ago and the outlook appears quite grim. Half-jokingly, some said that their savings wouldn’t last them a single day. One person sarcastically remarked, “What are savings?” In truth, a great number of people aren’t making their savings a priority and they could quite literally be living paycheck to paycheck. That’s not good.

In Theory and in Practice

Building up your savings cushion sounds simple enough: just spend less than what you earn. In practice, life can get much more complicated than that. You’ve got to keep a roof over your head and food on the table. Guilty pleasures of the first world, like a daily latte habit or the “need” for a new TV, are difficult to relinquish.

When looking at the equation income – expenses = savings, the conversation oftentimes turns to reducing expenses (like drinking fewer lattes) and pulling back on your spending habits. You might cut your cable TV subscription. You might choose to cook for yourself more often. It’s almost assumed that if you were to increase your income, the savings “problem” would simply disappear. And that’s simply not the case.

A Concern at Any Income Level

When you make more money, you’ll spend more money. The cheapest laptop or smartphone isn’t good enough for you anymore. Eating at a more budget-oriented diner isn’t good enough anymore. “Treating yourself” to something special somehow becomes far more expensive and, at the end of the day, your “savings cushion” hasn’t gotten any bigger.

It has to start with the right mindset. Live for today and savor every moment, sure. Just don’t keep kicking the can further and further down the road, because one day, you’ll actually have to pick it up.

How much do you have in your savings? If you unexpectedly found yourself without work, how long would you survive without taking out a loan?