Lets take our car to the bank and have a talk about safety. As discussed in a previous letter, your financial strength is very important. If you want to know the secret to never running out of money again, however, then we’re going to have to look at another concept. Your Financial defence!
Sometimes, life comes up behind you and sucker-punches you without any warning or reason. It’s an unfortunate reality of life that financial insecurity can hit you when you least expect it. When this happens, A strong financial offence may not be enough to keep your head above water.
In preparation for these moments, having a nice store of financial resources to deploy in a pinch, can be super useful. The extent of this benefit may be the difference between riding out a turbulent few months and not having enough money to last to the end of the week!
So what is Financial defence?
Financial defence is the buffer that absorbs unexpected costs from impacting your overall economic health. Like an airbag in a car, If you have a crash, it is nice to know that you will have something that will cushion you in the event of a disaster.
In terms of your town’s bank (like with its real-world counterparts) they would keep in their vaults a sum of liquid cash in case everyone needed access to some of their money at once. This insulation avoids the possibility of them running out of money and allows them to operate in a controlled and reliable way. These tactics used by banking institutions around the world lend weight to the effectiveness of this idea, and if it is good enough for them then it is good enough for our bank too!
Lets have a little chat with your bank manager about how much financial defence they would like? Popular opinion would tell you that it would be wise to have at least 3 – 6 months expenses saved up to insulate yourself effectively from crashes and everyday issues that you may face.
What you should do, therefore, is another audit on your finances. If you note down every time you spend money and keep track of how much this totals, then you should have a very good idea of how much it costs for you to live your prefered lifestyle. For the most accurate results, become very strict and don’t miss a single purchase and do this process for a minimum of 3 months. This ensures that you paint an accurate picture of your expenses and are able to get an average of your spending over a longer time frame.
Once you have an amount of money for your monthly expenditure, times that sum by three or six and you will have the total you need to save up. When you have this number, you need to save money like your life and whole towns future depends on it. You need to find an intensity that you have rarely experienced before because if something happens now financially, you need to pay out money without your reserves in place! This will force you into making decisions that rob you of your most precious recourses; Choice, Time and Freedom.
When you reach the financial summit and can safely access 3-6 months worth of expenses then you can smile in the understanding that you have ensured a level of safety, security and prosperity for your town that some people are never able to fully reach! The saving is worth it, trust me.
Rose-Blanc Town management