Bullish: Save Up an Emergency Fund, But Be the Kind of Person Who Never Needs One

I grew up reading Readers Digest. From ages 9-16, I read every single word of every single issue: This is Joe’s Pancreas. How to Protect Your Retirement Savings from Liberals. Drama in Real Life.

Every month, Drama in Real Life told the true story of someone who had fallen while mountain climbing and survived for days on a ledge the size of a lunch tray; or been mauled by a bear; or had a premature baby that slowly died and then looked down on its bereaved family from heaven; or been trapped in a burning building and recovered for months in a burn unit, receiving painful ass-to-face skin grafts, all played out over twenty-plus pages.

So, I grew up just assuming that adulthood entailed catastrophic events, and that no mater how hard you work in life, your family will always become trapped in a burning car.

Every erstwhile boyfriend of mine for the past 5-10 years could easily recount my plans of how I intend to make a living at such point that I am paralyzed so severely that I can only move my eyes (they have computers that you can operate using eyeball movements; I use such a computer to write test-prep manuals while maintaining an extremely witty blog). There’s also the plan for becoming hideously disfigured (it’s actually a pretty similar plan, just with a normal computer), losing my legs in a subway accident, etc.

My point is: prepare for the worst, and have more than one way to generate income. Mostly the last one, actually. It’s probably not healthy to constantly imagine yourself without limbs.

Financial advisors always suggest developing an emergency fund. Some suggest 3 months of living expenses, but I was prompted to write this column when one advisor suggested 8. Most people, when they think about “emergencies,” are thinking about losing their jobs — or, for freelancers, breaking a leg or otherwise having to cut back on gigs.

Eight months just seemed … excessive. What kind of person is going to lose her job and take eight months to figure something out? Well, among others: people with only one marketable skill, people who are completely disoriented outside employment for a large company, and people who put all their eggs in one basket.

So, don’t do that.

We’ve all heard the advice to “diversify your investments,” although most young people don’t have any investments, so “diversify your investments” sounds a bit like “get a high colonic with Dom Pérignon.” But you certainly can diversify your income streams.

Here’s an action plan.

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    • Lisa M.

      I loved Reader’s Digest as a child, so therefore I love this article.