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Bullseye: The Emergency Fund

Life Lesson #13: Murphy’s LawDon't Get Caught by Surprise - Build up an Emergency Fund

With certainty, I can predict that many times throughout your life, plans will be derailed and things will go wrong – even horribly wrong.  Count on it!  If you expect it to happen, you might not be so caught off guard when it does.

The Story: When I was much younger, I visited an indoor archery range with a friend.  While familiar with the fundamentals of archery, I was by no means an expert.

As I fired my first few arrows, something seemed amiss.  The arrow-rest on the bow I had rented was askew, causing some of the arrows to fly off course.  I brought this to the attention of the store associate, but he was uninterested in offering any assistance.

As my session progressed, I mostly figured out how to compensate for the problem.  What happened next, though, nobody was prepared for.

One of my arrows flew shockingly and unpredictably off course.  Before you brace yourself for an image of my friend’s lifeless body pierced by my arrow, rest assured no physical injuries resulted from this calamity.

My arrow veered wildly upward toward the ceiling and suddenly stopped, seemingly mid-flight.  It had actually plowed into the exposed head of a fire sprinkler suspended from the ceiling in the center of the room.  Instantaneously sirens wailed and water exploded from the sprinkler by the gallons.

Worse yet, the archery range owner couldn’t locate the main water shutoff valve.  So the relentless shower gushed until the water built up on the floor several inches high.  I was paralyzed in shock and fear as the unstoppable flow soaked through walls, breaching the store’s inventory.

When the firefighters eventually arrived and shut off the water main, one of the fireman approached me and said, “You hit the bullseye kid!”

The Breakdown: This lesson could easily be about insurance, but it’s not.  It’s about Murphy’s Law and one of the many truisms of life: Shit Happens!

So be prepared.  Among other things, know where the main water shutoff valve is located.

One thing can help solve many of life’s problems: money.  An emergency fund is a surefire way to prevent life’s bombshells from turning a problem into a disaster.  A widely socialized consensus recommends maintaining 3-6 months of living expenses in liquid holdings.  If you are the paranoid personality type like me, you might bump that up to 8-12 months.  This will allow you to properly deal with the problem without capitulating to the perils of credit-card debt.

Don’t expect to earn any meaningful return on your emergency fund.  It’s not intended to be invested in the stock market or anything else, for that matter, without FDIC insurance.  While I have employed some advanced strategies to maximize return on my emergency fund while eliminating downside risk, I will save that story for a future entry.

The owners of the archery range most certainly had insurance, which covered damage to the structure and inventory.  Even still, it took many months to rebuild the business.  Without a source of income during this time, the store owner would likely have to turn to credit cards or some other debt instrument absent an emergency fund.

So don’t wear a bullseye on your back.  Build up your emergency fund today.

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October 27, 2015 Leave a Comment Tagged With: emergency fund, murphy's law

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