Financial Independence Series

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Thu Apr. 2019 0 comments Editors Blog

Financial Independence Series

Financial Independence Series

Emergency Fund and Financial Buffer

Emergency fund is just common sense and structuring your life so that you are not living a whisker away from disaster while the Financial Buffer is the financial wall you build between yourself and economic insecurity.

Emergency Fund

You know and I know that you need to have a minimum amount of funds saved to keep you from disaster.  You have to save on your living expenses whether you are a salary earner or profit maker. Don’t forget the amount you keep in your emergency fund stems from your temperament, the stability of your job, your age, your health, etc.

Financial Buffer

The next step to your financial stability should be your Financial Buffer which has been explained above that, it is the financial wall you build between yourself and economic insecurity.

The financial buffer has a number of distinctions and benefits beyond an emergency fund.

·         First, the buffer is often not invested in cash. Instead, the buffer is in stocks, peer-to-peer lending, or other assets that provide a decent return over time.

 

·         Second, the amazing thing about the financial buffer is that at a certain point it takes on a life of its own. The assets grow to a point where they throw off enough income and capital gains that it's like you have another job--except this is happening automatically.

 

 

·         Third, and what I love most about the financial buffer, is that it shifts your calculations. You can increasingly think about the long-term. About what you want to accomplish and how you can most contribute and help people.

 

·         Fourth, the Financial Buffer lets you take risks you otherwise wouldn't be able to. You might even say it makes you more courageous.

Finally, the Financial Buffer increasingly allows you to direct funds to charity and other philanthropic efforts.

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