In Praise of the Buffer
September 26th, 2011
No, not an actual bug. We’re talking figuratively here — you know, the ant and the grasshopper? The ant saves up food for winter while the grasshopper goofs off, doing whatever grasshoppers do for fun. In the end, the ant survives the winter while the grasshopper … well, the less said about that the better.
The point is, while most folks will concede that it’s important to save for a rainy day, doing so is easier said than done. And yet it’s so important. If you don’t have a buffer — if you’re not giving yourself room for things you have no control over, like an emergency or losing your job — you’ll find yourself much more vulnerable if something bad ever happens.
In the past, we recommended that people save enough to cover bills and expenses for six weeks. However, given the longer periods of unemployment people are currently enduring, we now recommend a buffer of three months.
But it’s tough. Psychologically, how can we get motivated to save for something that hasn’t happened, or that may never happen? After all, even the ant knew winter was coming ahead of time.
One good motivator is your family. If you’re raising children, wouldn’t you want to have enough savings to, say, temporarily move everybody out of harm’s way if a natural disaster hit? What’s more, think of the peace of mind that would come with knowing you have a proper safety net in place.
But how can we actually go about creating that safety net? Here, it helps if we think more about the everyday purchases we take for granted. When we examine each expense, we can often find room for saving money. For instance, rather than paying for the deluxe cable package with all the bells and whistles, why not just settle for basic? Or instead of getting the latest sexy smartphone — and its $140-per-month data plan — why not opt for a more stripped-down model that does only what is absolutely necessary? Also, preparing meals at home rather than eating out is a great way to stay on budget.
It really comes down to prioritizing what’s most important to you, making sure that what you’re committing to is what you’re comfortable spending, and making sure you’re never deciding how much to spend based upon how much you’re earning.
Elementary, grasshopper.
