When I think about where I am financially, I also think about the choices that got me here. Some of them were smart ones. Sadly, many of them were not. Most of the time, I dwell on the money mistakes. Recently however, I got to thinking about the money wisdom that helped me tremendously. Truth be told, it came came from various sources. Unsurprisingly, the advice that came from those closest to me made the biggest impact. Words from my mother, uttered over 20+ years ago, set me down a very good path.
A long time ago, I had a job at a local banking institution. One day, I called my mom in tears. There had been talk about job cuts and I was very worried that I’d lose my job. I had just moved out of the house and wasn’t making a whole lot of money. Rather that offering words of comfort or solace, my mother laid down the hard, pragmatic truth.
“So long as you work for someone else, you’ll always have to worry about losing your job.”
Like I said, my mother laid it down. Thankfully, I had the brains to pick it up and to govern myself accordingly. My mother didn’t tell me what to do. She bluntly told me how the real world works. My view of the term “job security” was forever altered by her words. I can’t thank her enough for that!
My mother’s words came back to me as I was listening to a Youtube video while washing the dishes. It was one of those personal finance shows. The guest was explaining how she’d paid off 15 credit cards! She’d been furloughed for 35 days right after being hired. She swore that she would never again allow anyone else to control whether she had enough money in her bank account to pay for her basic necessities. The furlough ended and she got down to the business of paying off her debt and building her emergency fund.
Both myself and the YouTube guest had to make some sacrifices to solidify our financial foundation. We learned from our experiences of having our paycheques threatened. Here is a fact that none of us can escape. We live in a society were money means access to food, shelter, medical care, transportation, clothing, and options. Losing the ability to earn enough money to buy what we need is traumatic, unless you have a sufficient emergency fund to tide you over until the next source of income.
My mother had been completely honest with me. Thankfully, I realized that it was up to me to figure out to build a buffer for myself just in case. You’d best believe that a slice of every at-the-time-meagre paycheque found its way into my emergency fund. When I graduated school and started my career, I continued to divert money into my emergency fund.
I also made it a priority to maximize my RRSP contributions, and then later my TFSA contributions. Even in my 20s, I knew that I would stop working one day. I also knew that I would still need to eat and shelter myself as a retired person. Getting old doesn’t vitiate the need for money. Money for my golden years would have to come from somewhere, and it was up to me to figure out where.
On top of my RRSP and TFSA contributions, I directed a good chunk of money to my non-registered investment account. The words from my mother spurred me into taking action. As a result, I’m in a comfortable position today. If I were to lose my job now, I could survive on the cash flow from my investments. It wouldn’t be a luxurious lifestyle and I’d have to cut some fat from my budget. However, I’d be able to pay my bills without going into debt before finding my next job.
Let’s be real. Just because someone gives you wisdom doesn’t mean that you’re going to follow it. I could’ve ignored my mother’s words and chosen not to fund my emergency account. Had I done so, I would’ve been ignoring the truth and leaving things up to chance. There are so many things over which we have no control in life! Whether to build a financial buffer need not be one of them. Luckily for me, I had a bit of disposable income so I had the ability and opportunity to start saving.
My advice to you is make hay while the sun shines. The words from my mother are just as true today as they were 20+ years ago. Do you have enough money to survive for 35 days without a paycheque? Your next paycheque isn’t guaranteed. You need to be ready in case it doesn’t show up. Building a decent-sized emergency fund is going to take some time so start today. Whatever you can spare after paying your debt and paying for life should be sent to your emergency fund. And if you already have an emergency fund, great! Fill up your TFSA, then fill up your RRSP. If you’ve already crossed those tasks off your to-do list, awesome! Time to start funding your non-registered investment account. In short, you should always be saving a little something from every paycheque.
It’s not easy, believe me. And it takes a few years to get a few thousand dollars set aside. We all know that life isn’t getting cheaper. And paycheques do not grow quickly, atleast not in my experience. On top of that, there’s always someone who’s trying to get their hand in your pocket! We live in a society where we are encouraged, exhorted, and expected to spend every penny that comes our way.
Be that as it may, you owe it to yourself to prepare for the day when you might be the one losing a job or getting furloughed. Should that unfortunate day come, you need to be ready. The bills won’t disappear simply because your paycheque’s gone bye-bye. You need to build an emergency fund and keep it healthy. There’s no time like the present. Start today!