A Message in a Bottle
October 25, 2013Sometimes I read something that touches me and makes me remember that, no matter what is going on in my life, things could always be worse. And then I remember to pick myself up, dust myself off and get back to the business of living my life with less whining. When I read this article, I had one of those moments.
In a really cool date idea, a couple went to a pier and wrote letters, put them in a bottle and put the bottle in the water. At the time, the woman (Brittanie, who was in her early 20’s) was battling brain cancer. (Just my opinion, but that is FAR too young to have to deal with something as grave as brain cancer.) She wrote the letter, talking about the battle she was facing.
Fast forward a few years, and the bottle washes up on the shore of a beach in Guam. Guam! Guam? Wow! That bottle has traveled. A teacher and her students were doing a beach cleanup and found the bottle, contacted Brittanie through Facebook and the story made some news. The best news, though, is that her treatment was successful and she is now in remission and feeling healthier.
Life throws stuff at us. For Brittanie, it was cancer. For some people, it’s a job loss, a medical situation, the breakup of a family, the loss of a loved one…It can be anything, but I’m 100% certain that if you’ve lived for more than a decade or two, you’ve seen something that has made an impression on you that will last forever. Often, these setbacks have ripple effects. They change lives. Some of the ripple effects flow through and create a mess in a person’s financial life. I can’t even count the number of people I’ve talked to who have been driven to the brink of financial disaster by a job loss, a divorce or medical bills. There are some things that you can do now so that when (or if) that happens to you, the ripple effects don’t leave you completely devastated financially.
The biggest thing that we can all do a little bit better (including financial planners!) is living BELOW our means. That is a consistent theme in many of my sessions with employees of our client companies. The overwhelming majority of the population lives either above their means (accumulation of credit card debt is a major symptom) or at their means (living paycheck to paycheck is a major symptom). Only a very small percentage of people I talk to have sufficient emergency savings to handle a job loss that lasts more than 3-6 months or a health issue that requires funding up to the maximum out-of-pocket costs of their health plan. We all like to enjoy our lives, and often that enjoyment comes at a cost.
Our level of spending often rises equally as fast as (hopefully not faster than) our income increases over our career. My first job after college had a starting salary of $18,000. Guess what? That felt like some real money after being a student! And I was able to pay the bills, including my student loans, with that income.
As I made more money, I allowed my lifestyle to increase. I was saving the same percentage, which means I was spending the same percentage. And that translated into a significantly higher level of actual spending as my income rose. After my divorce, I went back to living like I was a new entrant into the workforce. (Funny how alimony and child support made that almost a necessity!)
The broader point is that at some point, we can choose to continue to increase our level of spending throughout our career. If we do that, we have to accept that our choice means that we are susceptible to one event putting us in a horrible financial position, bordering on bankruptcy if not into bankruptcy. Or, we can try to hit the “reset” button on our expenses and try to build up our “oh my goodness, what just happened to my life?” fund.
Out of all the recommendations that anyone has ever given you, the emergency fund is probably the simplest and most basic. (Along with living below your means…) Sometimes simple works! Sometimes simple is important. (Vanilla is by far the best selling ice cream flavor every year.) Having a large emergency fund has never hurt anyone! It can provide the ability to recover from what would otherwise be a devastating financial event. Having 9-12 months of your current level of monthly spending may seem like a lot of money, but you’ll need far more than that if you plan to retire one day. If something devastating like Brittanie’s cancer diagnosis or a downsizing happens to you and impacts your financial life in a big way, it would sure be nice to know that you’re financially secure as you write your message in a bottle.