As you go through life, you will learn that everyone’s financial comfort level is different. There are those who feel that having a year or two worth of monthly money set aside is okay. There are others who because of their high maintenance lifestyle needs much more than this. And, there are those who live closer to the edge of life and we all know who they are, they feel having three months of financial security does it for them.
I don’t know where each of you fit into this financial comfort analysis but you do fit in some category.
However, most of the people who I talked to agree that having six months of financial security allows them to sleep at night. This six-month number is good for them for now. They also know that this number will undoubtedly change as you age. This is because there are extra expenses that will come your way, whether you want them to or not.
For example, healthcare cost keeps climbing, the premiums on insurance policies are going through the roof and you get the point. All these issues of trying to live your life in comfort can drive you crazy.
What can you do to solve this riddle you may ask next?
Most of the people who I have asked on this matter had a similar response. They all have learned to put together a comprehensive monthly budget that included ” EVERYTHING”. This also consisted of the quarterly or once a year expenses. ( real estate taxes, annual insurance premiums and etc.)
After these expenses are captured, annualized them or divide them by 12 to arrive at a monthly cost. The monthly cost may come out to be from $2000 to $4500 as an example.
At this point, add up all the money coming into the home. ( salary, dividends, second job wages, overtime funds, cutting the grass for the neighbors’ funds, and etc.)
If the total of these funds doesn’t cover 1/12 of your annual expenses as noted above you are in a financial bind. Once in this position, you will be faced with two possible solutions. You have to find a way to make more money, or you have to cut out some of your luxuries items.
This looks hard to do from the outside but it can be done. There are plenty of people who are living in cash flow comfort today because they chose to make these kinds of money adjustments earlier in their life. I know this for myself, as I have talked to many of them in preparing for this article.
However, there is a terrific reward waiting for you from having your six months of cash flow being stacked away. The people who have successfully performed this exercise, they claim that they sleep better, have fewer migraine headaches, have lower blood pressure, lessen the times they have to go to the doctor, they have fewer heart problems, and you can fill in the rest.
So if this is the financial comfort zone that you want, you have to start working on building up your six-month cash flow as soon as possible. After you reach this goal, I believe you will be like the rest of us and will be able to sleep better at night, because the ladies noted in the picture of this article, do so.