What is a financial airbag and what should its size be?
Every person after thirty begins to think about how to provide for himself in case of unforeseen circumstances or create his own financial safety net.
A financial airbag is a kind of reserve of funds that is formed from regular income, such as salary, bonuses or other financial income.
This reserve can be used for such needs as medicine, unplanned repairs, or as a means of living during periods of absence from work.
Creating such a reserve is not difficult, the main thing is to approach this process creatively and learn to count.
Where to begin?
One of the conditions for creating a financial cushion is the complete absence of debt, and this is a purely psychological aspect, since in my life I have practically never met people who save money and have debts.
Having debt and saving are not compatible; if you stop borrowing money, it will help you start saving it.
Once you reach a balance between income and expenses, the next step is the appearance of free money.
Can you afford to save?
Most people don't want to save because they think they don't earn enough. Moreover, both those who earn $100 and those who will receive $10,000 a month think so.
But at the same time, there are many examples of how our grandmothers manage to save even from their small pension; the main thing here is to admit that you are spending too much on things that you don’t need.
For example, I never buy branded items, although I can afford them. Instead, I prefer to buy quality items from lesser-known manufacturers. Usually the difference in price is quite significant, but these things look no worse than branded ones.
This also applies to expensive alcohol, when a fabulous price does not always guarantee taste; some Georgian wines for 20 dollars are no worse than French ones for 200.
Learn to count
Almost all of my friends who have financial problems cannot answer the question of how much and where they spend money, they simply constantly do not have enough.
The first step to creating a financial safety net is to count your expenses; you yourself will be very surprised where the money goes and how many opportunities there are to cut unnecessary expenses.
Financial airbag size
The minimum size of the financial airbag should allow you to live on this money for 3 months. For example, if you spend $500 monthly, then your financial reserve should be at least $1,500.
But ideally, the accumulated funds should be enough for 12 months, only in this case you will feel confident.
At the same time, no one forces you to save half your salary in order to achieve the goal in a short time. It is enough for yourself to set a comfortable percentage that you will save from your income.
Most people call this minimum figure 10% of regular income and 40% of unexpected income. That is, from your salary every month, you save 10%, but from the 13th salary or additional bonus you can already save 40%.
Creating the desired reserve is not a quick process, but also not as labor-intensive as it might seem at first glance. Life is fleeting and you won’t even notice how the necessary amount will accumulate in your account.
Where to store your financial safety net?
If you have just started your journey of creating a reserve and your amount does not exceed the equivalent of several hundred dollars, then your home can become a storage location.
But ideally, make sure that funds from your salary are immediately transferred to a separate account with an increased interest rate, with the possibility of withdrawal at any time.
You should not invest your financial cushion in such low-liquid assets as gold or shares, since their implementation may take time.
Alternatively, you can use foreign currencies in your bank account, as statistics show that exchange rate growth usually outstrips bank interest on deposits .