One of my main motivations in my own financial turnaround was to escape the paycheck to paycheck life that we were living. I had begun to realize that people were really depending on me – not just my wife and my infant son, but my “future self” as well – and by living a lifestyle that could be so easily disrupted by unfortunate events, I was doing all of them a disservice.
What would happen to all of them if I suddenly lost my job? It wouldn’t be a good picture. We weren’t all that far from being homeless or having to move back in with my parents or Sarah’s parents if that happened. What kind of future trajectory does that give my life? It’s not one I really wanted.
What would happen to everyone if I got sick? What would happen to everyone if my car broke down? What would happen to everyone if we were suddenly robbed? What would happen to everyone if we were evicted from our apartment?
I didn’t have good answers to those questions. The truth is that our life, as it was, was incredibly fragile. There were all kinds of things that could easily cause it to shatter into a bunch of pieces.
I owed it to my infant son, my wife, my future children, and my own future self to build a much less fragile life, one that would be harder to disrupt due to an unexpected event or two. Over time, of course, that goal transitioned into financial independence, but even that goal is really just an anti-fragility goal.
So, how exactly does one make their life less fragile? Here are a number of steps I’ve taken over the years to achieve this very thing.
Build an Emergency Fund
An emergency fund is simply cash on hand that you can use in case of an unexpected event. Typically, most of one’s emergency fund is stored in a savings account at a local bank, though some may keep a small amount of cash at home in order to cover more extreme emergencies. Credit cards generally aren’t good emergency funds because they will fail you in many events such as identity theft, natural disasters, electrical grid failure, communication network failure, and so on.
Having an emergency fund secures your life against many different kinds of small emergencies, such as a short period of unemployment, a car breakdown, appliance failure, many natural disasters, and so on. Simply having a couple hundred dollars in cash in your home or a thousand or two in cash at the bank makes those problems easy to handle when they would otherwise be rather difficult to overcome.
How can I get started with building an emergency fund? The easiest method is to simply take a little bit of money each week out of your checking account and put it into your savings account. Most banks allow this kind of transaction to be fully automated, so you don’t even have to think about it. Each week, $10 or $20 goes from your checking into your savings and you don’t even have to give it a second thought. After a year, that becomes a $500 or $1,000 emergency fund. I never shut my transaction off – if I find that my emergency fund has become unnecessarily big, I might invest some of it, but I usually just let it ride because there will always be an emergency at some point. Here’s a detailed guide to building an emergency fund if you want more details.
Eliminate Debt, Especially High Interest Debt
Personal debt creates fragility. If you put yourself into debt, you’re lashing yourself up to a monthly bill, which means that you have to be earning more money each and every month to keep the bills paid. If you don’t pay those debts, you may have things repossessed, face legal repercussions, and almost certainly see your credit score devastated. This puts additional pressure on you to keep earning money, and the consequences of unexpected expenses or a job loss become greater.
Of course, debt can be eliminated. Once you pay off a debt, you’ve lowered your monthly bills, which gives you more freedom to invest and save for the future and more flexibility in terms of life options while also increasing your ability to handle unexpected events.
How can I get started with eliminating debt? Start by making a debt repayment plan. A debt repayment plan is simply a listing of all of your debts, usually ordered by interest rate from largest to smallest (my preferred method) or by balance from smallest to largest. In either case, you make minimum payments on each debt and then make the largest possible extra payment you can afford on the debt at the top of the list each month. When the top debt is paid off, cross it off the list and keep going until all of the debts are gone.
Strengthen Your Resume
Perhaps the best possible thing you can do to keep your career safe and secure is to keep your resume polished and strong. Having a good resume that’s attractive to employers and widely available will make hunting for a new job much, much easier. It will make the difference between success and failure if you find yourself out of a job or need to seek out a new job for any reason.
A good strong resume isn’t just one that’s updated with your latest activities, but is full of items that are relevant and interesting to potential employers. You want to make it your goal at work to take on tasks that are resume-worthy and potentially interesting to employers so you can add them to your resume, and you’ll also want to take on opportunities that bolster your educational certifications and skill set.
How can I get started with strengthening my resume? The first step, of course, is to get your resume freshly updated and available. One great way to do that is to simply use LinkedIn. You should also keep a document that contains a well-formatted resume and cover letter that mirrors the information on LinkedIn. In addition, you should look at jobs that are available in your field right now that you might be interested in and make sure that your resume addresses what those job listings are looking for. This might mean formatting your resume appropriately, but it also likely means seeking out certain kinds of resume-worthy tasks and educational opportunities at work. As you do those things, add them to your resume and keep it fresh.
When things get rough, a strong social network in your personal life and a strong professional network can help you through those challenging times. A great personal network can come through when you’re facing a personal crisis, providing help with things like emergency transportation or a place to sleep or things like that. A great professional network can do the same thing in your career, opening opportunities for you when you least expect them and also helping you transition to your next job when you need to.
Having those networks in place is invaluable when things go wrong, but it requires effort when things are going right, an effort that many people don’t put in. A strong social network and a strong professional network takes time and effort, but it can end up helping you far more than the effort and time you ever put into it.
How can I get started with building social connections and professional networks? Talk to people. Keep tabs on them by texting or calling or emailing or contacting them on social media regularly. Listen to them – don’t use this as an excuse to talk about yourself. Remember things about people and touch base with them on those things. The real key? When your friends or professional acquaintances need help, particularly when that help can be offered by you with little effort but can have a big impact on them, do it without question or expectation of anything in return. That builds goodwill, and that kind of goodwill is always a positive for you.
Eat Healthy Foods and Maintain Basic Physical Fitness
Just like the more financially oriented aspects of your life mentioned above, your health is also fragile. It can be hard to see it that way, especially when you’re young and really healthy, but your health will eventually slide off the rails if you don’t take care of your body from the beginning.
This has a financial implication, too. As your health declines, the cost of health care will go up and up and up. You’ll spend more on doctor’s visits, medications, devices… the list goes on and on. Having healthy life practices at the very least delays those costs and can even reverse or eliminate them.
It’s not that hard to keep your body healthy, either. Just eat more plants and don’t overeat. Walk more and find some fitness activities you enjoy and do them. It’s really not hard. You don’t need to master some sort of secret diet or secret super fitness routine. Just eat better food, not a ton of it, and move around more.
How can I get started with eating healthier and becoming more fit? When you’re loading up your plate, put more healthy things on it. That doesn’t mean avoiding the less healthy things you like – just put more healthy things on your plate and eat them first. Then, stop eating when you don’t feel hungry any more, not when you feel stuffed. Rather than just sitting around in the evening, go for a walk, or get up a little earlier and go for a walk to wake yourself up. Find some physically active things you enjoy doing and do them.
Save for Known Expenses on the Horizon
There are big bills that come around regularly in our lives, but often less frequently than once a month. Insurance. Property taxes. Income taxes. In the cycle of paying monthly bills, it’s easy to forget about those extra expenses.
Over time, even bigger expenses loom. You’ll have to replace a major appliance. You’ll have to replace a car. Those things are coming and you know they’re coming.
The thing is, those expenses often pop up and hit you hard. They wreck your financial plans for the month. They force you to go into debt. They devour your “emergency fund” (even though it’s not an emergency). They expose the fragility of your financial life.
Don’t let that happen. Plan ahead.
How can I get started with saving for upcoming expenses? Make a big list of every upcoming expense and irregular bill that you can think of, how far off those bills are, and how big they probably will be. Then, for each bill, figure out how much you’d have to save each month in order to be able to afford that expense. Planning on spending $10K on a car in five years? That’s $10,000 divided by 60, or $167 a month. Then, start putting aside that amount each month. Do it by setting up an automatic transfer at your bank from your checking to your savings. Then, when the expense comes around, you’ll already have the cash and it won’t cause you any stress at all.
Live Below Your Means, No Matter How Secure Your Income Is
My fundamental rule of personal finance is to spend less than you earn. The reason for that is simple – if you live that way, you’re always going to have money with which to pay off debts and save for the future. If you live below your means, saving for retirement is easy. Doing the big, long term things that make your life strong and secure become easy.
There’s another advantage, too. If you’re used to living below your means, an unexpected drop in income isn’t devastating to your day to day life. If you suddenly have to get a lower wage job and you’re used to living below your means, it’s just a small bump in the road. If you’re not… well, your entire life is now in tumult. That means your life is fragile, and fragility is what we want to avoid.
How can I get started with living below my means? The easiest way to do this is to just automate as much of your savings as you possibly can. Have your workplace make automatic 401(k) contributions for you. Set up automatic Roth IRA contributions from your checking account. Set up some automatic transfers from your checking account to your savings account for your emergency fund and planning ahead for big expenses, as noted above. Then, simply learn how to live on what’s left over without accumulating credit card debt. It’s that easy!
A fragile life is one that can easily be disrupted. A fragile life is a stressful life. A fragile life sacrifices a solid foundation for forgettable short term pleasures. A fragile life is something to avoid.
If you use these strategies, you’ll make your life much stronger, much more able to avoid disaster and handle unexpected events, much more likely to expose opportunities that you’re actually able to take advantage of.
Don’t let your life become fragile. If it is fragile, it’s well worth the effort to strengthen it.