Archives for July 20, 2017

The Intangible Benefits of Saving Money: Flexibility and Robustness

tardisNeed a break from the charts? Morgan Housel has an insightful article Let Me Convince You To Save Money that includes no historical data, no survey results, no fancy infographics. Read the whole thing, but here’s my favorite excerpt:

But the best reason to save is to gain control over your time. Everyone knows the tangible stuff money buys. The intangible stuff is harder to wrap your head around, but can be far more valuable and able to increase your happiness. Savings gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. Every bit of savings is like taking a point in the future that would have been owned by someone else and giving it back to yourself.

In my experience, every incremental bit of savings changes your life in intangible ways. Going from paycheck-to-paycheck to having $1,500 in the bank lets many things become minor speed-bumps instead of derailing your life. It’ll also make you happier according to (sorry!) the research: Does Cash Make You Happier Than Income or Paying Down Debt?

Continuing onward, going from having a basic emergency fund to $10,000 gives you the ability to take career risks without fear of starvation. You feel like you can put your full effort into a new business, or take a different job with less stress. I personally made a life-changing career switch at about $50,000 net worth.

Finally, going from $10,000 to $100,000 is amazing because that’s when you realize that reaching financial independence is a matter of WHEN, not IF. It’s a sign that you’ve put in the dirty work and figured out the hard bits. To put it crudely, “The first $100,000 is a b****.”

In biology, the term robustness refers to the “persistence of a system under perturbations or conditions of uncertainty”. In computer science, robustness is the ability to “cope with errors during execution and cope with erroneous input”.

In today’s world of questionable safety nets, having adequate savings improves the robustness of your family’s lifestyle. First, you can endure an expected car repair. Then you can endure a temporary blip without a job. Finally, you can go without a job whenever you wish (aka retirement). Your savings rate fuels all of that.