The Three Benefits I Noticed From Having a 6-Month Emergency Fund
It’s no secret that the average American barely has enough cash on hand to cover an emergency expense. According to ABC News, 40% of the Americans can’t cover an unexpected expense of $400 or more. Ouch. How can this happen in the richest country in the world?
I’ve been a part of that 40% for most of my adult life until the past few years. The feeling of an unexpected need to replace dying tires, pay a deposit to open up an electricity account for a new apartment, or pay for a root canal can cause a financial nightmare. It’s not easy living life in fear and struggling to live paycheck to paycheck. Living for a ‘payday’ isn’t going to set you up in order to pay off debt (if you have any), invest, and reach financial independence to live a life of freedom. I discuss the common material traps that most Americans fall victim to and how I learned how to break out of the ‘normal’ American way of life in the 3 Most Important Money Lessons I’ve Learned Before my 30th Birthday blog post. In this blog post, I wanted to discuss the benefits that I noticed after I had saved a 6-month emergency fund.
My Stress and Anxiety Reduced Overnight
The first benefit isn’t even a financial one. I’m not a person that is especially prone to having anxiety and usually try to avoid stress at all costs. But I have to be honest that as soon as I had $10,000 saved for my emergency fund, the daily stress that I had been holding within myself seemed to be magically released. I didn’t realize how much worrying about being able to cover an expense, pay for a Doctor’s visit, or anything else could affect my health and happiness on a daily basis. I was just used to it until I had enough savings that could cover most emergencies that could be thrown my way. I have more peace of mind knowing that I safely have my six-month emergency fund stored in a place that I don’t have connected to a debit card but I can have access to within 2-3 business days. I can breathe easier when I have a higher than average electric bill or when there’s a family emergency that comes up. Money is a tool that works in your favor and can improve your health and well being. Once you are no longer in a state of ‘survival’ and taking care of your basic needs, you can find a sense of peace and move onto thinking beyond food, shelter, water, and the other necessities in life to plan for the future.
I No Longer Get the Same Joy From a ‘Payday’ (Not the candy bar)
When you live paycheck to paycheck, you anxiously look forward to your direct deposit hitting your checking account. You wake up on the 1st and 15th (or whenever you get paid) to check your bank account and see the money that you so desperately needed. Most people have more month than paycheck and struggle to be able to last until their next paycheck. This causes you to look forward to it as a point of joy and out of utter necessity. It’s almost a cultural norm to live for your payday and immediately feel like you just have to spend the money as fast as you get it. When you have enough money saved to cover your basic, monthly expenses, your paycheck is just icing on the cake. It can be directed at paying down debt, investing for retirement, or on anything else that you want. You get a new joy from how your money can work for you instead of getting joy from anxiously waiting until your empty checking account finally gets topped up again. Don’t get me wrong, I love the fact that I am still very blessed and privileged to have a decent paying job in the middle of a global pandemic. I’m just past the point of living for a payday the same way I did before having a healthy savings fund.
You Open Yourself Up to Taking Risks & Finding New Opportunities
This benefit manifested itself later on. I didn’t immediately realize that when I had enough money to cover my expenses for half of a year, that I could be more creative and open to taking risks and finding new opportunities professionally. I no longer rely on the feeling of comfort from having a reliable and safe paycheck. I opened my 401k after I saved my emergency fund because I wanted to have another retirement fund outside of my Roth IRA. I also opened myself up to the possibility of taking on a consultant and contract job again which I didn’t feel like I had the mental bandwidth for before. My mind is no longer bogged down to closely monitoring my cash flow and worrying about day to day expenses. I no longer have the fear of an unexpected emergency throwing me off and causing financial ruin. I feel much more confident and open to opportunities that come my way. I don’t quite have FU Money (which is an amount of money that allows you to comfortably step away from a job, relationship, etc. without ever needing to earn money again) but I am well on my journey towards getting there.
I’m curious to know if you’ve also noticed any benefits from having a 6-12 months emergency fund or being financially independent that you didn’t expect to have. If so, feel free to comment below. Thanks for reading!
