Parachutes

When I was 20, I was able to pay myself a decent salary for the first time. I was lucky.

Never have been taught how to manage my money, I spent it all. I mostly spent it on restaurants. There was no restaurant in Tel Aviv I did not know back then.

And then the time came when I had to shut down my company. My only source of income, gone. Getting back on my feet meant I needed time. And time cost money. Money for rent, money for groceries. And I had none. I had to rely on my girlfriend at the time.

It was a terrible feeling. I lost my freedom. I depended on others with every single decision. No more restaurants, that was obvious. But gone were even the nicer options at the supermarket. I swore I would never let myself end up in that position again.

The obvious conclusion was to never spend everything I earn. I started maintaining a reserve. For me, I find 3 months of expenses are enough. In times of uncertainty, I try to save twice that.

Preparing for a rainy day goes beyond just money. I also make sure to have digital copies of every important document. I try to have everything I can in reserves. As with money, the size of my reserve is proportional to the level of uncertainty.

What about you? What would you need on a rainy day? Have you made sure you’d remain independent?