On Saving Money

Morgan Housel has a great post dated 3-9-17 about saving money.

I tell the smartwomensecurities ladies at CMU and my class at Thiel that much of your emergency fund, or short term savings, is not for emergencies at all, but for expenses that are random in nature, though certain to occur.  Every car needs repair at some point.  Every person gets sick or injured, and it may be you or it may be someone you want to care for.  Your friends may decide to have a destination wedding.

One point I had not made to the young people was this:

…the best reason to save is to gain control over your time. Everyone knows the tangible stuff money buys. The intangible stuff is harder to wrap your head around, but can be far more valuable and able to increase your happiness. Savings gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. Every bit of savings is like taking a point in the future that would have been owned by someone else and giving it back to yourself.

That flexibility and control over your time is an unseen return on wealth. When time isn’t on your side you’re forced to accept whatever bad luck is thrown your way. But if you have flexibility, you have the time to wait for no-brainer opportunities to fall in your lap. This is a hidden return on your savings. Savings in the bank that earns 0% interest might actually generate a meaningful return if it gives you the flexibility to take a job with a lower salary but more purpose, or wait for investment opportunities that come when those without flexibility turn desperate.

This is very true.  Savings is often referred to as a “cushion.”  This is why.  It allows a person to make a soft landing, to defer panic.

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