Saturday, 7 April 2018

Peace Of Mind and Emergency Funds

I've come across this question several times as the amount of cash I've indicated seems relatively low in comparison with my invested capital. 

'Do I have an Emergency Funds available?'
The answer is, Yes. I do. 


I've also indicated this at the bottom of my page on 'Portfolio':

Portfolio you see here does not include emergency funds, CPF funds or any other form of money required for daily expenses. Funds/equities here are purely my investment portfolio which I've established when I'm 19 years old back in 2017. Also, should the market evaporate completely, I will not starve because of what that is here. 


The keyword is 'starve because of what that is here'


It's definitely not pleasant to go through this sticky situation twice after 2016.

Read: Polytechnic Student with $3.63 as Net Worth - 1 Year Later

If you are going to starve because of your investment in big financial events such as GFC or losing sleep because the counter you've bought is going south, it's very likely that you are overly-invested in the market. 

While I will not talk about how good/bad having an investment is. Neither will I talk about the need to have one. The most important thing is to have a peace of mind, regardless of what you do. 

Personally, I feel that the emergency funds provides me with a safe level of comfort, which gives me a peace of mind when being invested. This has allowed me to sleep easier at night too. 


One can definitely argue about the need to have an emergency fund available to you when credit cards and several options are readily available. Or even certain that you have no kids, no liability, still studying.. Why do you need it?

Remember the word there? Emergency Funds.
This means that this sum here is supposed to help you when there is an emergency. This emergency could be a sudden loss of income, illness or anything that demands an unexpected amount of expenses from you

As a student, having emergency funds suggests to me that even if I do not work and my invested capital fully evaporates, I will not need to ask for dollars from my family even when my expenses account depletes totally. 

I don't enjoy asking for dollars from my family and it had been a really long time since I last done so. 

At least for 6 years, if I did not remember wrongly. 

Yes, it applies to even when I have $3.63 as my net worth. 
Fortunately enough, I had been working a little and my pay came in the very next day. 

This taught me a very serious lesson. 



Having this emergency funds available, it prevents me from starving and offers me a peace of mind.  

At least for the duration that my emergency funds are able to sustain me and that I do not have income due to any reasons, I'm not having a big headache as someone who doesn't have one!




So, instead, ask yourself:
1. How much is your overall monthly expenses? (This includes mortgage, food, bills etc.)
2. What is your age and how 'long' of emergency funds will you need?
3. Most importantly, with that amount, will you be able to sleep in peace when you loses your income and investment evaporates completely? 
4. No? Increase the amount by a fold.
5. Still no? Increase it by another fold. Repeat until you can sleep peacefully. 
6. If you still couldn't sleep peacefully, it's time for you to reduce on your un-neccessary commitments. 

Remember.. peace of mind is priceless.

It's important to be able to sleep in peace. 

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Read: Peace of Mind and Emergency Funds. Really?

7 comments:

  1. Hello Sleepydevil,

    Been 'stalking' your blog for a while now and I got to say I'm really impressed!

    I wish I was as knowledgeable/mature as you when I was your age (10 years ago....) and I will be really proud/happy if my 1 year old boy can grow up to be as sensible as you at this age!

    Couldnt agree more with you that peace of mind is priceless.. Some people always want 'more! more! more!' to keep up with the Joneses however when they sleep they worry about bills and stuff.

    Keep up the good work and good luck to you!

    Any idea when enlistment is already or still too early? :)


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    1. Hi Wife Say I Niao,

      Nice name you got there. Firstly, thank you for the kind words. However, I still have much more to learn. I've dropped by your blog btw, a warm welcome to the local blogosphere :)

      I'm sure your boy will grow up to be much better than I'm :)

      I will be conscripted in this coming fall. Looking forward to learning from you and your upcoming post! :)

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    2. That's a funny name. CZM says the same to me too!

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    3. Thank you Sleepydevil! Hoping I can learn a lot more by joining the community and I think I already did! :)

      Good luck for the next 2 years and make the most of it!

      KPO, A part of me wants to 'punch' my wife whenever she 'pokes' me by saying I'm niao cos she knows I hate it! ha!

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    4. Hi KPO, Wife say I Niao,

      I wouldn’t be surprise that my wife will ever call me that too :) I never believed that a haircut from Kimage will make me look like Johnny Depp or Leonardo Di Caprio.

      Delete
  2. Hi Sleepydevil,

    You lucky you can sustain your lifestyle at $3.63, that's a very good lesson for you. Plus you are still staying with your parents, phew. In the future when you have your own family and house, your emergency funds will definitely need to go up much higher.

    I like that you are responsible and have an emergency fund. Just don't forget to enjoy your single life at this time, it's much more important to explore and network now, without burning a hole in your pocket or having to boast to your friends :)

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    Replies
    1. Hi Jes,

      Thank you for your kind words. However, personally, I think that I’ve much to improve on.

      Indeed. Having once entered that situation, that would be my last thing I’ll ever want to dream about.

      With this little network I see around me today, I guess that’s a relatively difficult task. I’m not a boasting person by nature and don’t enjoy being too competitive.

      Stressful to be overly competitive. Else, I’ll start losing hair early!!

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