Why Saving Is Important
Apart from the inescapable financial crisis which we discussed in the last article, nobody of us is safe when it comes to sudden personal disasters.
Many of us have already gotten such a message and it hits you really unprepared.
The abrupt loss of a loved one.
A small pain in a part of your body results in a diagnosis with a potentially terminal illness.
A car accident that leaves you in the wheelchair for life.
It sounds paradoxical, but I worked in sales as a financial coach and sold insurance for years, but I never believed that the discussions I had with clients on a daily basis could one day also affect myself.
I always believed what probably we all do secretly: “yeah such bad scenarios can happen, and they might happen to others, and sure this is horrible, but this would never ever happen to me. Impossible.”
I was sure about this belief, until one day me and my girlfriend had a car accident that would change our lives forever.
Had we not had proper insurance and savings, our lives would be financially destroyed forever.
We lost an income in our household.
Suddenly there were several hundred dollars of medical bills we had to pay every month. And our leisure time was dominated by visiting doctors, therapists and even lawyers since the hospital made failures during the operation, which led to her not being able to move her right hand anymore.
And I didnt even start to mention daily pain, personal problems, relationship problems, awfully high doses of strong medication on a daily basis, changes in personality, several operations, visits to rehabilitation centers, more medical bills, and as a result of all the pain massive restrictions in private life and overall enjoying life.
Things like going on holiday or just making a trip out of the house suddenly have become a luxury we hardly ever had.
All this happened in my mid-20s, believe me I had no expectation for any of this.
But there comes one day and it changes your life and your view of the world forever.
Had we not saved a large portion of our income, had we not watched our expenses closely and made sure that there is always a financial surplus at the end of each month from both incomes - then this car accident, which happened in less than 2 seconds by the way, would have made us both bankrupt.
There would have been no way to pay all the medical bills.
We would have had to sell our apartment and move back to our parents, much less talking about making vacations, driving a nice car, wearing nice clothes or anything that makes life worthwhile.
Such scenarios can hit you faster than you might think.
And you will never be safe from these instances. Even though we had all possible insurance, it takes years before they are also paying out the sum that would actually be due.
And especially if the sum is more than a few thousand dollars - you have to fight in court to get it out of them. At the time of writing this, there are still 3 different lawsuits running against our insurance companies - 4 years later!
And keep in mind, we both worked for an insurance corporation for years and know people and their systems….
That means even though insurance is necessary and available for such scenarios, to really get the financial aid you deserve you will have to fight for it.
And if you do not have the financial reserves to fight for your rights, and much less to survive those periods of ultra-low-income as we had it, you might end up with zero at the end.
What if the accident takes away your working power because you end up in a wheelchair, what will you do then?
Ever wondered how people get homeless and end up on the streets?
Now you know.
Interestingly, people tend to be overly optimistic when it comes to their own faith and destiny. Have you ever seen one of these bloody war movies like Saving Private Ryan?
Did you also wonder how people could ever sign up to be sent into such a massacre voluntarily?
According to polls done with army recruits, these people are well aware that in a war there will be death, pain and suffering. But every single one of these soldiers is sure that these things will happen to others in his team, not himself.
The same can be observed in the opposite way when people play the lottery.
They are fully aware that there will be only one winner out of 300 million people. But still millions of people buy lottery tickets because “hey, I might be the lucky one!”.
And so people take their life overly optimistic, until one day disaster strikes.
Many are not prepared for any of such circumstances and lose everything.
To make sure you will not be caught with your pants down in a forward bending position, always have to have a financial safety pack ready.
That means being prepared to survive for at least 3-6 months from your savings only in case all your income should be gone for whatever reason. This emergency fund should always be available - and must remain untouched at all times.
I know it sounds like a lot, but this has to be an extra position in your savings if you really want to be financially safe and stable, which means this has to go apart from your general investments and savings.
Think of it as the rainy day fund, which really only has to be used when it is a rainy day.
And even though I mentioned that you will have to fight for your refunds from insurance policies, you should still buy them to have all those risks secured.
If you have a binding contract and always paid on time, they have not much to hold against you when you demand the agreed sum of money in case something bad happens to you.
It does not pay to save those extra 150$ per month in order to lose the right to receive 300.000$ in case you are not able to do your job anymore after an accident.
By living with a financial surplus every month, similar to losing your job in a financial crisis you will be better able to withstand any personal disaster that might strike you.
I really hope that it never will and that you will always be healthy and secure, but the only certainty we have is the uncertainty that we cannot predict what will happen to us.
Now, you have been warned!
If you ever wondered why you should save money - now you know what might happen one day.
And if really nothing ever happens to you - how about living a good life or retire early with what you saved? Having a pile of cash at hand has never made anyone feel bad as far as I know.