Economics on the small scale

Friday, March 24, 2006

The secret for financial success, I'm convinced, is to prepare for financial failure.

Worried about your car breaking down ? Start socking away money for car repairs.
Worried about your Christmas credit card bill ? save for it over the rest of the year.
Worried about losing your Job ? save, save, save until you have a 3-6 month deep rainy-day fund.

If you anticipate the worst that can happen to you financially and prepare for it ahead of time, you'll be better able to cope because of it. Even if you're still building your rainy-day fund, you'll be much better off than if you didn't have one.

And if the worst doesn't come to pass, you'll have the resources at hand to take advantage of financial opportunities when they occur.

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