Financial safety pillow - What is it, how it should look like?


 

A financial safety pillow is our safeguard, which gives us great peace of mind. It allows us to cover unexpected expenses without needing to take out high-interest loans or ensures a decent living in case of, for example, job loss.

The main benefits of having a financial cushion:

  1. Peace of mind

  2. Due to the aforementioned peace of mind, we automatically become better investors

  3. We can afford to make bolder life decisions that will pay off in the future and make us happier, such as quitting a job we don't like

It is commonly accepted that the amount of money that should make up a financial cushion is six times our monthly expenses. For some, this will be too much, and for others, too little. It all depends on our situation - a financial cushion should look different for a single person living with parents without any financial obligations than for the head of a family with two small children and a mortgage.

Creating such a pillow should be our financial priority, and until it is established, all generated financial surpluses should be allocated towards it. Only after having such a pillow, can we start thinking about investing/expanding surpluses.

Where to keep such a cushion? These funds should be kept in financial instruments that allow them to be withdrawn immediately if needed and are characterized by the lowest risk and volatility. Therefore, it is not a good idea to keep the cushion in cryptocurrencies or stocks. 

Comments

Post a Comment

Popular posts from this blog

Introduction and table of contents

Image
In this Blog I am writing down my knowledge which I am constantly expanding about finances, personal development and psychology. I will share with you various techniques of money saving, money earning and investing. Also the habits that will make your life objectively better, not only financial wise. Consequently using this knowledge in your life will for sure serve you good. I treat this blog also as my private vault of knowledge that I gathered and I am constantky expanding. Please keep in my mind that I am not native English speaker, I am from Poland and the reason why I decided to also translate my original polish blog to English was to reach a wider audience. I hope you can forgive me any language mistake/flaws and that despite them you can focus on the content. Below table of contents: 1) Recommendations Books I recommend that match the Blog theme Polish version of this blog. 2) Personal Finances Financial myths that you should stop believe in. Financial safety pillow - What is i
Read more

Fundamentals of personal finances - retrieve the control over your money.

Image
 Are you one of the people that lives from paycheck to paycheck? You've had enough of this and you want to change that? Then this post is for You. Below I'll share with you few easy "tricks" that surely will improve your financial situation. So let's start from the basis: 1)  Strictly specified home budget. You won't be able to prevent your money from disappearing if you have no idea where exactly they disappear. Home budgeting will help you to track down the biggest enemy of your personal finances which are uncontrolled expenses. How do you start home budgeting? In the very beginning it will seem very annoying, because the best way to figure out where our money disappears is to write down all of our expenses and gather receipts if possible and then in the end on the month work with this data. After first month we should already notice some "red lights" and we will acknowledge the fact that we spend way too much money on certain things (what things t
Read more

Basics of gold investing

Image
 Gold has been a symbol of wealth and stability for centuries. Its enduring value attracts investors seeking a safe way to allocate their capital. If you're wondering how to start investing in gold, this guide is for you. Here are the basics every beginner should know. Why Invest in Gold? Safe Haven : In times of economic crisis, inflation, or political uncertainty, gold is often seen as a safe haven. Its value tends to rise when other assets lose value. Portfolio Diversification : Adding gold to an investment portfolio helps diversify risk. Gold often moves inversely to traditional assets like stocks and bonds. Inflation Protection : Gold maintains its value over the long term, making it an effective hedge against inflation. Types of Gold Investments Physical Gold : The most traditional form of investing. You can buy gold coins, bars, or jewelry. Storing and securing physical gold is a crucial aspect of this form of investment. Coins : Popular among investors are bullion coins lik
Read more