On the home front, I have been doing more basic financial counseling than usual, and I’ve had some say to me that it would be hard to build a buffer of 3-6 months of expenses. If that is true of you, I would encourage you to build a smaller buffer of one month’s wages. Why?

  • A change to good habits rarely happens immediately. You gotta walk before you can run.
  • Psychological changes happen slowly, and there is a mental reward to achieving a smaller, interim goal.
  • The idea of living off of last month’s paycheck is a simple one.
  • Contra Aristotle, money is not sterile. It tends to beget more money, once you pass a certain threshold. Why?

There are discounts for upfront payment on large purchases, but the biggest reason is that once you get used to living on less than your full income, and living off of the buffer fund, there is a tendency for the buffer to grow. You have begun to master a key concept:

Money has importance tomorrow that is more valuable than spending on purchases of trivial importance today.

I’m surprised at how money burns a hole in the pocket of so many people. Spend down to the last dollar in the pocket and then some. No wonder the credit card companies are so big and profitable.

I have another article coming up on this, but it is critical to basic financial management that you place importance on the ability to meet future needs with greater certainty. Thus the need for the buffer, which implies saying “no” to low value and low priority spending.

It’s not a question of the intellect usually, but of the will. When will you start making money your servant, rather than serving it? Go build the buffer, even if it is small. In time, with increased will power on your part, it will grow.

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