Get Financially Fit!

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I once travelled to Singapore for business.  I went during the rainy season and the hotel told me to carry the umbrella that was provided in the room.  After a few days in Singapore I lost the umbrella and didn’t think much of it since I grew up in Oregon.  Even though it can rain a lot in Oregon, you can almost always still dart from one location to another without getting wet.  In Singapore I got caught in a torrential downpour where the it was raining so hard the droplets were literally bouncing off of the ground.  Luckily I was able to take shelter under a bus stop cover.   I had to wait a half an hour the rain stopped.  Once I got back to the hotel I requested another umbrella so that I wouldn’t get stuck.  I learned that having an umbrella is like having a rainy day fund in our financial life.          

A rainy day fund is your safety net when life’s challenges arise.  I recommend that you save up and be prepared for the unexpected loss of a job or a significant medical event.  Hopefully you will never need your rainy day fund, but in the event that you do you can focus on the challenge at hand.  I recommend that you target a rainy day fund size that is appropriate for you age and your career.  

In general I recommend that if you’re under 30 years old, save 3 months of living expense.  If you are between 30 and 40 save 6 months of living expense.  Above 40 years of age, accumulate 12 months of living expense.  You should increase these amounts if you are in a career in which a lot of time is needed to get hired.  Conversely you can reduce your rainy day target balance if you are confident that you can quickly land a job quickly.

In summary get your umbrella prepared for the possible rainstorm.