What can an Airplane teach us about Financial Planning?Investing Insights Financial Friday
--What can an Airplane teach us about Financial Planning? --
Would you feel comfortable getting onto an airplane if there was a single point of failure that could take the plane out of the sky at any moment?
I know I wouldn't! Airplanes have multiple backups, with some backups having an additional backup to get passengers from A to B as safely as possible.
But how does this apply to financial planning?
It shows the importance of needing a backup.
Saving to save helps create a backup to a single point of failure with money- the reliance on a paycheck to fund short-term spending needs. Saving to save can help create an Emergency Fund.
For many of us, the probability of losing a paycheck decreases as we get further into our careers. However, that probability can never reach 0. The unexpected is always out there; Recessions happen, wages can reduce, and even disappear.
You don't need a specific reason to save. It's great to save for a car, a home, and retirement. But it's equally important to save for things you can't possibly predict or even comprehend at the moment.
A high savings rate means having lower expenses than you otherwise could and having lower expenses means your savings go farther than they would if you spent more.
Other benefits of savings:
- It can allow you to take a different job that may pay less but give you more purpose
- It could enable you to take extra unpaid time off of work to be with family or for whatever reason you would want
- It could allow you to wait for investment opportunities that come when those without flexibility turn desperate