I touched on this concept last week but felt the need to write about it even further. I am a huge fan of what I call “cushion”. I want to have cushion or space for surprises in my life. This applies to money, time, and even driving.
Money Cushion
Ideally, you want to spend less than you make. You want to have some savings. This is a financial cushion. Even a little savings over the long term will add up. You want some “cushion” in your spending so that when something unexpected happens or a need comes up depending on the size of the need you can handle it out of your excess cash flow or out of savings.
I like to have and also recommend that my clients have an emergency fund. This is your “cushion.” This is your safety net for when you need it. If you lose your job or a family member is sick you want to have some savings that is in cash and readily accessible when you need it. The rule of thumb for emergency funds is 3 months of expenses if there are two working members of the family or 6 months if you are single or there is only one breadwinner in your family.
This money is not “working” for you. It is sitting in cash. It is there to provide the peace of mind and freedom to do something that needs to be done, usually unexpectedly in an emergency.
Many people do not like having so much money in cash since it is not earning much or have much growth potential. I personally am fine with that because it gives me peace of mind but I also see the other side. So an alternative to holding so much cash in an emergency fund is to have or get a home equity line of credit. This is a line of credit that is available to you in times of need. The amount of the line of credit is based on the amount of equity you have in your home. You do not pay for anything until you draw on the line of credit and write a check on it. Then it is like an additional loan, usually at a decent rate.
Bottom line – you want and should have a money cushion – an emergency fund and / or a home equity line of credit. This can remove some stress and provide peace of mind in dealing with the unexpected financially. You do not want to have to sell investments at an inopportune time because you don’t have an emergency fund.
Work on paying attention to how you spend your money to see where you can save if you are struggling to make ends meet. Even $25 / month into a savings account will eventually add up. Do something to make this happen.
Driving Cushion
I was taught that you want to have at least two seconds of space between you and the car in front of you when driving on the highway. This provides some space and time so that if the car in front of you stops suddenly you (hopefully) will have enough time to stop or avoid an accident. I am a rule follower and will check and count to see if I have two seconds of space between myself and the car in front of me. My husband knows I am a fan of cushion when we are driving.
You also want to have space between you and the car in front of you when stopped. This is so that if a car hits you from behind, you will not hit the car in front of you and you would have space to move out of a bad situation if needed.
A little extra space between you and the car in front of you can save you from car damage, repairs, insurance premium increases and possibly physical injuries.
Time Cushion
I am very good with having and keeping a financial and driving cushion but not so great at living with a time cushion / safety net. The time cushion is where you allow additional time to deal with unexpected surprises. This can be traffic, getting lost, a long line, a difficult child, the possibilities are endless.
Why do I always expect things to go perfectly when planning my time but I don’t plan this way for my finances or driving? Rarely do things go without any issues yet I plan my time that way which means I am often rushing and stressing so I can be on time. As I mentioned last week, I read the recommendation to add 25% more time to whatever you honestly think is the time needed to do something so that you can have some built in space for problems and issues. This is analogous to setting expectations low and then everyone is happy when you meet or exceed them.
You may need to try different rules and see what feels best for you. As with everything – different things work for different people but experiment and see what works for you in creating a cushion in these areas of your life.
Where else and how else can you apply this concept of cushion?
I would love to hear how it goes and what you notice after doing it a while. I am trying to not cut everything so close so that I can relax and enjoy the journey more for whatever I am doing – a financial plan, a drive across town or trying to get out the door in the morning with my two boys. 🙂
Have a fabulous day!
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